22nd September 2016 - At the beginning of July, a number of commercial property funds were forced to suspend trading, when concerns about the UK economy caused investors to redeem their holdings in the these funds in large numbers, in the days following the EU referendum.
Buildings, as anyone who has bought and sold a home will know, can take a long time to sell, so commercial property funds have what is known as a 'cash buffer' to be able to quickly return money to investors if they want to sell. However, at times of extreme selling, this cash buffer can soon become depleted, which is what happened in July.
The good news is that, much earlier than many expected, a number of these funds have signalled that they will be lifting their trading suspensions.
Columbia Threadneedle will be re-opening its UK Property fund this coming Monday, 26th September 2016.
The M&G Property Portfolio, Standard Life Investments UK Real Estate and the Elite Rated Henderson UK Property funds will re-start trading on 14th October 2016.
Aviva Investors has said it does not expect to re-open its property fund for another few months.
Fiona Rowley, manager of the M&G Property Portfolio, commented: “I was really concerned in the first few weeks after the referendum about whether we were going to have a buyers' strike with no liquidity. But overseas buyers are back in the market and we have seen a number of entrants post Brexit. The aftermath as not been as bad as I had feared.”
The F&C Real Estate team has said recently that, throughout the time the UK is extricating itself from the European Union, there will be indecision in the property and rental markets. However, there are still pockets of opportunity, particularly outside of London. In the West Midlands, for example, rental growth is up 15% due to very strong under supply.
: “The suspension of trading was seen very negatively by some, but actually I think it was the right thing to do. The gating stopped the panic selling in its tracks and I think this is a good outcome for investors - certainly better than selling at a 15-25% discount. Our clients certainly have not been phased by events and there is definitely not a long waiting list of people waiting to redeem as soon as they can.
“I still like commercial property as an investment. It gives diversification and is a good source of income. As long as investors understand it can be illiquid at times, I think it has a place in most diversified portfolios.”