Property market experiences shift

The fund invests in a broad selection of securities issued by real estate investment trusts or companies that own, develop or manage real property from around the world. As of December 31, the fund had 61 per cent allocated to North America, just slightly underweight compared with the UBS Global Real Estate index at 61.7 per cent.

The fund is overweight Asia Pacific ex Japan, with a 18.3 per cent weighting compared with the benchmark’s 17.5 per cent.

Commercial property markets in Europe, however, have struggled to keep pace with other parts of the world. According to the latest Royal Institution of Chartered Surveyors (Rics) Global Commercial Property survey, rental predictions were in negative territory across much of Europe, with the noticeable exception of Germany.

However, rental expectations remain positive in eight of the countries surveyed, with respondents in China, Brazil, Russia and Canada among those saying rents will rise, not fall. In each of these markets fresh demand for space continues to outstrip new supply which reflects the relative resilience being displayed by these economies.

On the investment side, it is the same four countries (China, Brazil, Russia and Canada) where expectations for capital values are strongest, while across Europe sentiment is downbeat. Interestingly, the revival in transactions is expected to persist in the epicentre of the last property crisis, the US, in spite of concerns about the outlook. Investors might wish to bear in mind that regarding the outlook for future sales, surveyors in the US reported the strongest reading of all.

Jenny Lowe is features editor at Investment Adviser