Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a646793

Yield-hungry investors look to property

by James Smith on Dec 27, 2012 at 07:00

Yield-hungry investors look to property

For an asset class that forms the basis of a cliché about safety, property’s decline amid the credit crunch has soured many investors on the sector.

A 45% peak to trough drop from 2007 to 2009 will do that, but with the sector long known for its income profile, many yield-hungry investors are taking another look.

Advocates are now highlighting property’s return to its long-term role as a source of income, particularly with Western government bonds at 300-year lows.

Ignis UK Property manager George Shaw, for example, says income has been the key driver of the sector’s returns over the last 12 months and will remain so in the future, in stark contrast to the massive capital gains available during the early Noughties boom.

With income integral to performance, Shaw says property is a unique asset class because it is possible for investors to influence and enhance this key return stream.

‘Our strategy involves managing income through measures including rent reviews, lease restructuring and physical improvement to our holdings such as refurbishment,’ he says.

‘We continue to see income as the core driver of property returns, and asset management initiatives such as handling lease expiries and maintaining lower vacancy levels are therefore at the heart of our approach.’

As an example of how Ignis has managed its assets, Shaw highlights steps the group took to improve yields on its Ellenborough House property in Cheltenham. ‘Following a refurbishment programme throughout 2011, we were able to restructure our lease with long-term tenant Rickerbys Solicitors for 60% of the accommodation with a 15-year deal,’ he adds.

‘We have also found new tenants for the residue of the property, which is now 85% let. This refurbing, re-gearing and attracting new tenants is the kind of proactive management that can enhance our income stream.’

Since the downturn in the property sector began in 2006, Shaw says the asset class has returned to its long-term return profile, swapping massive fluctuations in capital value and
tracking equities for solid yield and steady growth.

Sign in / register to view full article on one page

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Long time coming: is the recovery here to stay?


Ian McVeigh and Steve Davies, managers of Jupiter's UK Growth fund, talk about their predictions for the UK equity space. Click here to watch a series of sponsored interviews with Jupiter's fund managers on the UK equity market.

Today's top headlines

More about this:

Archive

On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet