Aberdeen completes £250m investment into UK property market

Aberdeen Property Investors (Aberdeen) said on Monday that it has acquired around £250 mln (EUR 284 mln) of UK commercial properties in the last three months on behalf of institutional clients. 'Our size and reach in the market has allowed us to complete 15 acquisitions,' said John O’Connor, managing director of Aberdeen Property Investors UK.

He added: 'Over the next few months we hope to invest £500 mln on behalf of our clients.' A number of new deals have already been identified, the company said.

Properties recently acquired by Aberdeen include a student accommodation block in Bournemouth representing an investment of £20 mln; a grade-A office development in Glasgow bought for £66.5 mln and a retail park in Llanelli acquired for £31 mln.

The company noted that all of the group's UK direct property clients have recently allocated additional funds to invest or have indicated funds may be made available on a case-by-case basis. Investor interest in UK property has risen over recent months as property has looked increasingly attractive, relative to other asset classes, from a yield perspective.

Property's yield premia over low risk asset classes, such as nominal government bonds, index-linked government bonds and cash have remained at very high levels. As investor risk aversion has receded, yields on higher risk assets, such as corporate bonds and equities, have fallen sharply over the past year and property yields look set to follow.

Looking ahead, competitive bidding, combined with a lack of stock, is likely to continue to drive capital values up in the short term, the company said. This should result in a very strong level of projected performance in 2010, with total returns expected to be 16%, due to investor demand driving values strongly higher, despite rents still falling in all sectors. From a five-year perspective, Aberdeen is forecasting an annualised return of 9.2%. The majority of this (approximately 7%) will be delivered by income return, with the remainder coming from some strong capital returns over the next year.