UK commercial property up 3.5 per cent in Q2

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UK commercial property outperformed main market equities between March and June, returning 3.5 per cent compared to a loss of 1.6 per cent from the FTSE All Share index.

The IPD UK quarterly property index, which measures the total returns of direct UK commercial property investments, returned 3.5 per cent in the second quarter of 2015, driven by industrial and commercial property.

The index, which is used as a benchmark by a number of property investment funds and investment trusts, tracks the performance of 9,618 property investments and has a total capital value of £145.4 billion as at June 2015.

The strongest constituent sector over the period was office space, which returned 4.9 per cent between March and June, followed by industrial property with 4.3 per cent. Retail property was the weakest constituent, returning 2.2 per cent over the period.

This stands in stark contrast to the UK's main equity market, which made a loss of 1.6 per cent in the second quarter of the year as global economic and political events including the Greek crisis led to widespread volatility.

PROPERTY FUND WINNERS AND LOSERS

Notably, the performance of the IPD UK quarterly property index also stands in contrast to that of both the open-ended and closed-ended property fund sectors.

Over the three months to 30 June the Investment Association's property sector lost an average of 4.5 per cent while the Association of Investment Companies' property direct UK sector returned an average of just 0.2 per cent.

In the open-ended space the average was, however, dragged down largely by property funds invested in global, European and Asian markets. The top-performing open-ended mainstream UK commercial property fund was Threadneedle UK Property, which delivered 2.3 per cent over the period while the worst performer was Scottish Widows HIFML UK Property, which lost 1.2 per cent.

Among investment trusts the top-performing mainstream UK commercial property fund was F&C UK Commercial Property, which delivered 4.6 per cent in share price returns in the second quarter while the worst performer was the Schroder Real Estate Investment Trust with a loss of 4.2 per cent over the period.

Money Observer's August 2015 issue features a special report on investing in UK and European property. Subscribers can access the digital edition here.


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