UK property is the one to watch for 2010, with commercial property set to deliver strong returns, says PRUPIM.

The global commercial property fund managers say that, despite a period of poor performance and continued uncertainty over how banks could unload their property exposure, double-digit returns are on the cards, as forecast in the group's latest UK Real Estate Perspective report.

Paul McNamara, director: head of research at PRUPIM, said: "The potential for politically-driven austerity measures and the currently inscrutable investment strategies of property bankers are troubling property investors currently but the balance of data suggests significant capital growth this year, with a return to steadier growth in the years afterwards. Investors perceive UK commercial property as being a 'sweet spot' offering the potential for higher returns than high grade bonds with less risk than equities."

Meanwhile, property fund manager CB Richard Ellis Investors (CBRE Investors) is to launch a UK direct property fund for defined contribution (DC) pension investors.

For the first time, DC pension investors will have access to a fund run by a purely property specialist investment manager, something that is overdue, believes Nick Preston, senior director.

Preston told Pensions Age: "This is something that we have been working on for four years or so. We have been working with the FSA, Treasury and HMRC, structuring a flexible and tax efficient vehicle for DC investors.

And Preston is positive on the outlook for the fund: "The potential demand for this produce could be colossal from our conversations with consultants. They want specialist managers in the market offering these produces that they can put the capital into."

He explained that, in his view, property should make up five to 15 per cent of a pension fund's portfolio, with the potential to go higher than that. "Most pension funds are big and ugly enough to realise that even if 25 per cent in property, they still have 75 per cent that is in liquid assets.

"Property has always been seen as being too difficult to invest in for DC - there is a hang up about needing liquidity. But it should be part of a balanced portfolio."

Preston added that the demand for property in these portfolios could evolve as consultants are pushed to be more "creative" with their DC investment recommendations.

Share Story: