Investment ‘ugly duckling’ aspires to be a swan

hedge against a market downturn.

But there are issues which are perceived to be negatives.

The property market can be just as prone to crashes as the Stock Market, but, while selling company shares can be done in seconds, offloading a building can be a lengthy process.

Property is being affected by the on-going Brexit uncertainty and decimation on the High Street is threatening to force down retail let levels.

Consequently, it is generally accepted that clients should not have more than ten per cent of their portfolio invested in property.

Property investment has tended to mean prime central London sites, the market predominantly driven by overseas buyers. And that is likely to continue, despite Russian oligarchs like Roman Abramovich being out of favour in the wake of the Salisbury nerve agent attack.

But there are attractive regional assets with strong yields to be had too.

According to the Birmingham Office Market Forum which compiles data on the city’s commercial property market, 2017 was a record year.

Deals surpassed the one million sq ft barrier – a total take-up of 1,005,072 sq ft across 130 deals compared with 692,729 sq ft across 139 deals for 2016.

Office take-up was boosted by the emergence of HS2-related demand, together with key larger transactions in the professional services and the serviced office sectors, such as PwC committing to an additional 58,631 at One Chamberlain Square and Regus taking 76,000 sq ft at The Crossway.

The Forum said: “Breaking one million sq ft office take-up for the first time is extremely positive for Birmingham during the current period of unprecedented development activity.”

The trend seems to have continued into 2018. What then of this IA decision? In order to help investors and advisers analyse funds and returns, the 62 funds involved are being split into Direct Property and Property Other from September 1.

Direct Property focuses on funds investing directly in UK property such as student accommodation and commercial and residential, while Property Other will include those investing in property securities, direct funds with specialist mandates, and hybrids.

Speaking to Investment Week last month, Austen Speakman, investment manager at Brooks Macdonald, and Jason Hollands, of the Tilney Group, were enthusiastic.

Mr Speakman said: “We see the sector change as a positive step, mainly due to the way the different types of property investments react and move in short-term markets.

“Direct bricks and mortar investments tend to be less volatile than property securities over the medium to long term, and this is particularly true during times of heightened volatility within equity markets.”

Mr Hollands believed the creation of the Property Other sector was a “sensible move”.

However, he cautioned: “Even within the UK Direct Property sector, there will still be a lot of variety and you will still have to look very closely at the specific strategies.” Trevor Law is managing director of Eastcote Wealth Management, chartered financial planners, based in Solihull. Email: tlaw@eastcotewealth.co.uk The views expressed in this article should not be construed as financial advice