Improved outlook for property in 2013

Royal London Asset Management (RLAM) sees an improved outlook for property investing in the UK with total return of 5.5% in 2013.

This follows a strong start for property activity in 2013, particularly in central London offices, centres and leisure developments. However, the IPD Monthly Index was slightly down for capital at -0.6% in the first quarter of 2013, with the largest fall, in retail, of -0.9%. This was due to failures and a move away from poorer locations, partly driven by the move to internet retailing and preferring larger units with more choice.

Manager of the Royal London Property Fund, Stephen Elliott, said that he expects the yield gap property and Gilts to narrow as investors search for yield. “We initially expect that more prime will see some yield improvement, whereas secondary assets in poorer locations will continue to There is scope for the better secondary properties to appreciate, particularly in the South East,” commented.

Looking at different sectors of the market, Elliott said that retail will struggle as the squeeze consumers leads to falling profit margins. “Investors will continue to seek the best and ignore the with the possibility of some targeted purchases of good secondary outlets.” He added that the London office market will continue to attract overseas investors, as it is liquid and transparent could be boosted by currency depreciation.

“The availability of grade-A space is increasing this year, but we expect demand to match this, in the West End where supply is more limited,” Elliott commented. In the industrial sector, he said internet- based companies are seeking distribution space, which is helping parts of the market.