‘We are get­ting out of Lon­don while we can’

The Daily Telegraph - Your Money - - FRONT PAGE -

The res­i­den­tial prop­erty mar­ket in Lon­don is start­ing to de­flate. Will commercial prop­erty in the cap­i­tal go the same way? Strong growth in re­cent years has made it dif­fi­cult to find value in Lon­don and prop­erty fund man­agers are now look­ing fur­ther afield.

Richard Kirby, man­ager of the £1.2bn F&C Commercial Prop­erty Trust, told Tele­graph Money which cities were catch­ing his eye and how commercial land­lords were fac­ing in­creased com­pe­ti­tion from ser­viced of­fice providers such as WeWork.

The trust is on our Tele­graph 25 list of top port­fo­lios (tele­graph.co.uk/ go/25funds).

Our pref­er­ences at the mo­ment are UK re­gional of­fice build­ings, in­dus­trial spa­ces and lo­gis­tics sites [such as ware­houses and de­pots], al­though the lat­ter are ex­tremely ex­pen­sive.

We are look­ing at the cities out­side Lon­don as we achieve a higher yield and more value. We es­pe­cially like Bath, Bris­tol and Manch­ester. Ear­lier this year we bought an of­fice build­ing in Bris­tol as the sup­ply of prime ac­com­mo­da­tion in the city cen­tre was at a record low, so we have seen big rental growth there. It is a very at­trac­tive city with a lot of ameni­ties, but a lot of the older, poorer of­fice stock has been taken out of the mar­ket in re­cent years.

This of­fice block is our only hold­ing in the city at the mo­ment but we are look­ing to in­crease that ex­po­sure. We have been re­duc­ing our Lon­don hold­ings over the past cou­ple of years be­cause yields have fallen so low.

We have al­ready sold a cou­ple of as­sets that we think have reached the lim­its of their growth. The last one we sold was an of­fice build­ing in Soho – 25 Great Port­land Street. Al­though we have been re­duc­ing our ex­po­sure Richard Kirby is the lead man­ager ger of the F&C Commercial Prop­erty Trust and man­ages a num­ber of port­fo­lios.

He trained as s a chartered sur­veyor and joined F&C in 1990.

He went on to be­come a fund man­ager 23 years ago. to cen­tral Lon­don, we still have a sig­nif­i­cant ex­po­sure to the West End.

Our largest asset is St Christo­pher’s Place, a devel­op­ment con­tain­ing re­tail, res­i­den­tial and ho­tels. It has per­formed very well for us over three to five years.

F&C prop­erty fund man­ager Richard Kirby tells Adam Wil­liams why re­gional cities are more at­trac­tive

Lo­gis­tics sites per­formed very well for us from 2009 to 2014; we were buy­ing prop­er­ties that de­liv­ered yields in ex­cess of 9pc. We were there be­fore the stam­pede to­wards that sec­tor and have ben­e­fited from rental growth.

As for mis­takes, look­ing back I should have got into in­dus­trial prop­erty in the South East quicker.

We are un­der­weight on this com­pared with the bench­mark, but the pric­ing is too ex­pen­sive and it is too late. That was one strate­gic er­ror.

We have had lit­tle ex­po­sure to shop­ping cen­tres since we made the de­ci­sion in 2007 to get out of the sec­tor. We have never gone back and that has been very ben­e­fi­cial to our per­for­mance in the past decade.

We re­main in­vested in out-oftown re­tail parks and have two large in in­vest­ments in that area [New­bury Re­tail Park in Berk­shire and Sears Re­tail Park in Soli­hull, War­wick­shire].

We like the con­ve­nience they of­fer s shop­pers, but they are not with­out th their chal­lenges given the num­ber of r re­tail­ers in trou­ble at the mo­ment.

We have some ex­po­sure to re­tail­ers a at risk, but we would hope to relet th those units if ten­ants failed.

That could be hard work as w we might have to split them up


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