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Roof Set To Cave In On Property Returns -- City Advice

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Roof set to cave in on property returns

Wed May 31, 2006 2:32 PM BST

By Tim Sharp

LONDON (Citywire) - Leading commercial property investors are steeling themselves for a dramatic drop in returns from bricks and mortar.
Some fund managers driven out of the direct market by spiralling prices are seeking refuge in property equities. Others are renegotiating leases while circumstances are favourable.
Standard Life has warned that while total returns from commercial property will hit 15.1 percent this year by 2008 they will have dwindled to just 5.4 percent.
Barry MacLennan, investment director at the Scottish insurer, said rental income would be crucial when capital rises tapered off and that he was currently renegotiating leases.
He said investors need to protect themselves from a property slump that could strengthen the negotiating hand of tenants. The average unexpired lease on the IPD index is 9.3 years.

IR sensitive assets are not going to fare well in the global IR hiking environment. BTLs may soon become financial millstones.

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  • 301 Brexit, House prices and Summer 2020

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