REAL ESTATE - Unlisted UK real estate funds returned 69% last year, driven by the outperformance of the City and West End, according to the Association of Real Estate Funds (AREF).
The association’s newly launched quarterly report claims the £80bn(€118.5bn) unquoted pooled property funds attracted record levels of institutional investment over the year.
Specifically, AREF’s 60 member funds attracted £5.25bn new money and returned 20.6% – above the FTSE All Share and the IPD Quarterly indices. Those weighted in the City and West End showed the best performance.
However, investor demand continued to exert downward pressure on yields. The weight of cash invested in property pushed average yields down to 3.26% – a record low – in Q4.
"We’ve seen the growth of the whole unlisted sector. It’s attractive – and convincing compared with gilts and cash," said AREF CEO Rachel McIsaac.
"Part of the success has to do with the macro picture. But there are also satellite industries – the bankers and lawyers – doing good business, which means confidence in the underlying health of tenants."
A separate monthly report published last week by the IPD identified a January drop in returns on commercial property to 0.7% from 1.5% in December.