Rob Bould, head of investment at GVA Grimley said: "There has rarely been a better time to put money into bricks and mortar--if you can find the stock.
"While occupational demand--and therefore rental growth--has been weakened by the recent downturn in the global economy, the sheer weight of money from private investors, institutions and overseas funds is driving yields down to a level which looks unrealistic - unless you compare the returns to alternative investment classes."
Although current published forecasts indicate total returns from property of 7-8% by the end of this year, Bould is more bullish. Based on his experience of the market--including the fact that exceptional demand from investors is pushing most major property deals to best bids--he strongly believes that total returns for commercial property by the year end will be in excess of 10%. This contrasts with current returns on cash (4%), gilts (3%) and equities (-12%).
Bould sees no reason why this position should change, albeit he thinks it is increasingly likely that there will be a correction in the residential market, specifically the buy-to-let sector in the South East which is facing saturation.
Growing uncertainty in the finance markets is also prompting retail investors to seek alternative investment opportunities. Bould says a number of institutions are looking to capitalise on this demand by offering retail investment products suitable for the individual investor. Scottish Widows' UK Balanced Trust, for example, was significantly oversubscribed when it was launched in March. The first-ever UK retail fund, it offered the public the chance to invest in tax-efficient shares in commercial property, held through two limited partnerships. Its success is now driving other institutions to consider similar products.
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