Institutional investment offices

Citation

(1998), "Institutional investment offices", Property Management, Vol. 16 No. 2. https://doi.org/10.1108/pm.1998.11316bab.005

Institutional investment offices

Institutional investment offices

Keywords Investment, Offices, Property market

Robert Fames, Investment Partner at Hillier Parker, commenting on the publication of the Office for National Statistics' (ONS) figures for institutional investment in property for the third quarter 1997, said:

It is interesting to note that activity levels have remained reasonably constant at high levels for the last five quarters. This is a direct result of the increasing popularity of property to a wide spectrum of buyers. The rationale is driven by the confidence that rental growth is gaining pace, and that the prospects for property yields are that they will narrow the gap with current gilt yields.

There have been a number of deals done with clients who have been allocated additional monies. Although the market consistently refers to a shortage of stock, our own volume of transactions is up by over a third over the last 12 months, but this is not sufficient to meet demand.

Although the average yield on property has stayed static (due to rounding), it underlines the fact that demand is concentrated in pockets, and not evenly spread across the market. The market is more analytical and focused.

The main points of the ONS findings are:

• •

  Total net investment in property by insurance companies and pension funds fell from £441m in the second quarter to £49m in the third quarter, its lowest level this year. Insurance companies disinvested a net £96m from property over the quarter, the first net disinvestment by them since the second quarter of 1995. In contrast, pension funds invested a net £221m, the highest level since the first quarter of 1992 (see Figure 3).

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  Total turnover by insurance companies and pension funds was just over £3.7bn, compared with £3.9bn in the second quarter. Insurance companies' property turnover rose to £2.532bn, the highest level since the second quarter of 1994, while pension funds' property turnover fell to £1.203bn, its lowest level since the first quarter of 1996 (see Figure 4).

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  Insurance companies' purchases of property totalled £1.218bn in the third quarter, down from the second quarter's exceptionally strong figure of £1.449bn, while sales totalled £1.314bn, the highest figure since records began in 1963. Pension funds' property purchases and sales were both below their second quarter levels.

• •

  While overall property net investment by insurance companies and pension funds was significantly lower than in the second quarter, this reflected the overall pattern of investment. Overall net investments (in all asset classes) by UK institutions fell from £19.9bn in the second quarter to £14.1bn in the third quarter.

Figure 3 Total property net investment

Figure 4 Institutional property investment turnover

All enquiries to Robert Farnes, Hillier Parker. Tel: 0171 915 7110; Melissa Hubbard/Vikki Hennen, Tavistock Communications. Tel: 0171 600 2288