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Ignis raises 2014 property return forecast to 15.5%

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.

Shaw said: 'Demand for Central London assets, both retail and offices, will remain strong in 2014. The acceleration of the leasing market with the prospect of rental growth will continue to support investment performance in this market.'

He also believes there will be opportunities beyond the traditional London hunting ground.

'Yield compression in regional markets is also expected to continue and the scale will depend on the extent that those buyers, unable to secure assets in Central London, switch their focus to these alternatives,' Shaw explained.

'Both UK and overseas investors are searching for opportunities beyond London and the South East with funds in particular focusing on stock offering the potential for asset management angles.'

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George Shaw
George Shaw
11/16 in Property - UK Physical (Performance over 3 years) Average Total Return: 29.09%
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