Is it time to move back into commercial property?

Among property fund buyers, HSBC’s multi-manager head Guy Morrell sees prospective performance on a five-year view as providing a reasonable premium over risk-free assets although risks remain.

Morrell, who runs the group’s Open Global Property vehicle, is expecting the strength of investor sentiment to continue and feels competition for prime assets will put further downward pressure on yields.

‘This will result in stronger returns over the short term but the amount of refinancing that needs to be completed by 2011, combined with the recent pricing recovery, may encourage more sellers,’ he said.

In early 2009, Morrell said prospective long-term property returns had become more attractive than at any time over the previous five years but performance materialised quicker than expected in Q4.

‘Occupier markets will remain weak in the short to medium term with further rental declines but we expect positive rental growth in 2011 with widening divergence between sub-sectors,’ he said.