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Ignis raises 2014 property return forecast to 15.5%

by Dylan Lobo on Apr 02, 2014 at 14:22

Ignis raises 2014 property return forecast to 15.5%

Ignis Asset Management believes the sweet spot for commercial property has got a little sweeter.

The asset management firm, which was recently acquired by Standard Life Investments, has upgraded its 2014 total return forecast for the asset class, from 11.5% three months ago to 15.5%. This would represent a 5% increase on the return generated in 2013.

The prediction outstrips the forecast by the Investment Property Forum (IPF), which in February revised its annual target up from 9.3% to 12.1%.

Ignis attributes its revision to the acceleration of capital value growth through further yield compression.

It forecasts all major property sectors will generate capital value growth over a three-year horizon, resulting in an annualised total return of 10.7% over the period versus the IPF's 9.5% forecast.  

George Shaw, (pictured) manager of the £1.2 billion Ignis UK Property fund which has returned 12.2% in the three years to the end of February expects the office sector to deliver the best returns, followed by industrial and retail.

According to Shaw, demand for property has been underpinned by solid UK economic data, as well as improving global growth expectations.

The was supported by the Office for Budget Responsibility's recent upgrade for UK economic growth this year from an original estimated forecast of 2.4% to 2.7%, while the growth prediction for 2015 was raised to 2.3%.

The economic recovery has increased flows into property funds, with the sector registering net sales of £736 million in the final three months of 2013, according to the Investment Management Association (IMA).

In addition, PropertyData recorded over £21.2 billion of transactions over the quarter, the highest level on record.

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