For investors who want to make the most of any potential growth in the UK property market, investing in a fund with assets in commercial property may be the solution. Funds invested in commercial property can provide much needed diversification for the investor.
Paul Glover, chief investment manager at NFU Mutual, explains: "Whilst the commercial property market has seen strong returns in recent years and there is some uncertainty over shorter term prospects, the income attractions relative to other asset classes and diversification benefits mean property can play an important role in balanced investment portfolios."
Commercial property may include office space, industrial units, warehouses and retail properties across the country. They have the potential to provide investors with a steady stream of income from rent paid by tenants – businesses leasing the space – as well as potential capital growth.
However, it can take time to get your money out of investments in funds that invest in commercial property, which means they might not suit those needing immediate access. This liquidity issue, as well as your own attitude to risk, should be taken into consideration when calculating how much of your portfolio to attribute to them.
How we can help
NFU Mutual offers a number of funds with exposure to commercial property investments. If you want to find out more, click here or speak to your local NFU Mutual Agent who will put you in touch with a Financial Adviser. Alternatively call 08082528113. We’ll explain our services and charges.
NFU Mutual Financial Advisers advise on NFU Mutual products and selected products from specialist providers.
NFU Mutual's property portfolio
Whilst commercial property returns are currently coming under some pressure and future return forecasts are lower than we have seen for a few years now NFU Mutual still sees commercial property as a key part of its long term investment strategy. It continues to invest and manage a diversified property portfolio with assets across the UK with a real focus upon both quality property stock and quality, financially secure tenants.
Richard Topps, head of group properties at NFU Mutual, looks for high-quality properties in great locations with financially strong tenants to add to NFU Mutual's Commercial Property portfolio. "In today's uncertain climate commercial property returns forecasts are reducing as a result of lower capital value growth expectations. Maintaining a quality tenant line up and solid income streams will be key to property returns over the next few years," says Richard.
"Creating and managing a well-diversified property portfolio can help to take advantage of different localised markets and different sectors as they perform over varied timelines and at different levels."
NFU Mutual invests in a great array of properties that take advantage of the diversification of returns. It invests in assets from shopping parks in Cardiff to supermarkets in Kent, distribution units in Bristol and a high street store in the heart of Covent Garden. Many of the top cities you shop in every day will be home to buildings owned or partly owned by NFU Mutual.
Temple Quay, Bristol
The development has completed a 90,000 sq ft office building with a successful letting programme having been undertaken securing some national UK tenants at strong rental levels. Purchased for £2.5m, after development the final product is expected to have a value of more than £40m.
24 Old Bond Street, London
A historic building, in a historic location. The main tenant of 24 Old Bond Street is Italian high fashion outfit Salvatore Ferragamo, which has been trading in the street for an incredible 75 years. But don't forget to look up from street level too – a 90-year-old bell tower sits atop the building housing London's only carillon. The retail street continues to go from strength to strength with record rental levels regularly being achieved and tenants keen to get a presence in the locality.
The Brewery, Cheltenham
NFU Mutual is in the process of redeveloping its current holdings off the lower High Street, Cheltenham, to create an enlarged £80m retail and leisure scheme anchored by a cinema, bowling alley, various restaurants, a hotel and a number of retail units. Having started in 2014, it is planned to complete in 2017.
Benton Road, Newcastle upon Tyne
Acquired in 2015 this is a large Sainsbury's supermarket with adjoining car showrooms. Let on a long lease to a good covenant this will provide the Fund with long term stable income.