Property  

Why property will outperform bonds

Risky speculative developments, which can fail at many points during the planning and building process, are undesirable in uncertain economic times. Refurbishing standing investments to add value is a better way to achieve income growth for clients.

Another promising growth area is commercial properties outside expensive central London. These must still be well connected to main roads, such as the M25, and situated in areas where people want to live and work.

The country’s shopping habits have changed – and building work has not kept up. As consumers increasingly turn to the internet to shop rather than visiting the high street, companies need more space to keep their wares.

For that reason, warehouse storage and distribution facilities are much in demand. The industrial sector is especially appealing because few properties have been built during the past decade, meaning there is high demand for the existing stock. Most appealing are modern, detached distribution warehouses with high docking doors, allowing large trucks to enter and exit with ease. Such warehouses should be situated close to motorway networks.

While internet shopping is seeing exponential growth, there are some things people want to see in person before making a purchase. Furniture, kitchen and pet stores still receive frequent visitors. That is why retail parks, where customers can park and visit DIY or furniture shops, are another type of property investment that should bear fruit.

While rental value growth in the retail and industrial sectors has stayed steady, the office market has seen a 2.5 per cent drop in value in the 12 months to June 30, 2017, from a previous high. This is in part because of fears Brexit will have a negative effect on the types of businesses that need office space.

To summarise, in a low income environment, carefully selected property holdings will deliver better yields than bonds, with a similar degree of stability. As the UK adjusts to the post-Brexit poll reality, a central tenet of investment comes to the fore: diversification will help cushion investors from volatility.

Don Jordison is managing director, property, of Columbia Threadneedle Investments