Multi-managers have dismissed concerns about slowing growth in the UK commercial property sector, saying this is part of its natural cycle.
Data from the Investment Property Databank (IPD) showed that the rise in commercial property values slowed in August.
The 0.9 per cent growth was down from the 1.1 per cent seen in July. It was the first time since April that the figure had dipped below 1 per cent.
But multi-managers seemed unconcerned by the slight slowdown, explaining it away as an understandable pause, considering the exceptional growth in the past year, and a natural process, given when and how most properties are valued.
John Ventre, manager of the Old Mutual Spectrum range of funds, said he was “not particularly concerned” by the slowdown because “there is a technical factor at play”.
He said: “IPD’s main valuation cycle is quarterly, in March, June, September and December. The monthly series is estimated because not every property is valued every month.
“The IPD tends to be a bit conservative in the ‘estimate’ months and then in the final month of the quarter we see a catch-up in the data.”
Data from the IPD suggests that there is generally a catch-up in the main valuation month. The June reading of 1.6 per cent growth followed readings of 1 per cent in May and 0.8 per cent in April. Similarly, March’s growth was much higher than that seen in January and February.
Aside from the technical factors behind the slowdown, the managers also expressed the view that a “pause for breath” was healthy.
Mona Shah, portfolio manager on the Rathbone multi-asset portfolios, said: “The IPD has experienced a sharp increase this year, but it would have been very difficult for that index growth to persist at this rate. A lot of hot capital has gone into commercial property, and so perhaps a pause for breath is actually a healthy development.”
Funds in the IMA Property sector have been some of the highest selling in the IMA universe year to date, as investors have rushed into the asset class.
However, Aviva Investors’ Nick Samouilhan said he was winding down his overweight position in property because he believes the easy money has been made.
Mr Samouilhan, who co-manages the Aviva Multi-asset fund range with Peter Fitzgerald, said he had been reducing his position in property.
Rather than selling his stake in property funds, he has been reducing his weighting through not allocating inflows to the asset class.
He said the property rally had “largely played out” and that he expected the asset class to return to being the “deeply unsexy asset” it has traditionally been.
He also pointed out that there are incoming headwinds for the sector from any rate rise in the UK.
This affects the value of property assets and could potentially make investors less interested in the yield on offer from property.
