Insurance News Archive

Schroders sees end of commercial property drop

One of Britain's largest property funds is predicting that the UK commercial property market will recover from its current slump early next year.

Schroders surprised investors last week when it cut the value of its flagship £2 billion unit trust fund by one eighth - but it now says that move reflected the anticipated "bottoming-out" of the market before Christmas.

Citing strong demand from occupiers across the retail, industrial and regional property sectors - particularly the M4 corridor - the firm's head of property research, Mark Callender, said that though the economy was not "revving up" it was certainly "ticking along"

"We think it [the market] will correct itself very quickly," he began. "We take the view that the downturn in capital values has taken off some of the investment value gains made in the past couple of years, but we are in a different cycle to the boom-and-bust scenarios of the 1970s and 1990s."

The one exception to Schroders rosy forecast is the City office market, with the fund continuing to voice concerns over excess supply as a result of credit-crunched banks reeling in their loan books.

Commercial property yields hit a record low of 4.5 per cent in June due to slumping capital values and are currently hovering around the 5.25 per cent mark.

29 Nov 2007