The past five years or so have been decidedly mixed for commercial property investors. On the one hand, Brexit, the pandemic and the rise in flexible working have upset demand patterns for office space and high-street shops. On the other, investors focused on industrial, logistics and warehouse assets – which facilitate online deliveries – have seen handsome returns.
- Income growth potential
- Prudently managed
- Lower fees than peers
- Lower yield than peers
- Discount has narrowed
- Economic sensitivity
This has resulted in a “two-tier market” for real estate investment trusts (Reits), according to AJ Bell's head of investment analysis, Laith Khalaf. While logistics Reits trade at lofty premiums to their net asset values, retail and office landlords now sit at wide discounts. However, for a certain category of fund – owners of unloved real estate pivoting towards more so-called 'new economy' assets – there are much less demanding valuations to be found. As well as offering a decent prospect of income and asset growth, these funds also offer some inflation protection along the way.