Funds in the IMA Property sector produced an average return of 5.56 per cent in 2013, higher than the average return from 13 other IMA sectors including the Sterling Strategic and Sterling Corporate Bond and Global Bond sectors, and the Asia Pacific ex Japan peer group.
London and the southeast has traditionally been the growth region for prices across both residential and commercial property, with figures from the IPD UK Monthly Property Index, showing UK commercial property values rose for the ninth consecutive month in January.
IPD, which provides real estate benchmarking and portfolio analysis services, notes property values have now increased by 9.8 per cent since May 2013, with a 0.6 per cent rise in January. According to the company, this means property delivered a return of 1.1 per cent in January, slightly below the 2.1 per cent in December.
The research showed offices delivered the highest total return of the three main sectors, at 1.7, while industrial units produced a return of 1.3 per cent and the retail sector brought up the rear with the lowest return of just 0.7 per cent. Phil Tily, executive director and head of UK and Ireland, IPD, adds: “Real estate values continued to rise in January, alongside continuing good news around the UK economy, though this was at a slower rate than the extremely strong growth delivered in December last year.”
Within the IMA Property sector, returns have varied year-to-date to February 20, with the best returns coming from the vehicles with exposure to European property rather than those with UK-only exposure.
The Henderson Horizon Pan-European Property Equities fund, run by Patrick Sumner and Guy Barnard, has produced the best return in 2014 so far at 7.62 per cent, closely followed by the Swip European Real Estate fund with a return of 6.49 per cent, which is managed by Vicky Watson and Mark Phillips.
Meanwhile at the bottom end of the table those property funds with exposure to Asia have suffered, presumably through fears regarding a slowdown in Asia and weaker Japanese GDP growth in the last quarter of 2013.
Among the strugglers are the Henderson Horizon Asia Pacific Property Equities fund, run by Tim Gibson, which has recorded a loss of 5.53 per cent and the First State Asian Property Securities fund with a loss of 5.35 per cent. However, overall of the 46 funds in the sector only four have recorded a loss in 2014, compared with eight out of 45 funds for the full year in 2013.
There is still time for these stragglers to catch up, however, with the outlook for property looking particularly strong in the UK.
However, Chris Urwin, global research manager, real estate at Aviva Investors, warns: “While secondary assets and regional offices have most appeal, market sentiment and pricing is moving quickly so we believe acting rapidly is important.”