Investors are facing a long wait to access the £13bn of cash currently trapped inside UK property funds, experts have predicted, as businesses remain “far from normal” and the commercial property market continues to be subdued.
Independent valuers said there were a number of things — many of which were “quite a long way off” — that needed to happen before the surveying body would agree to lift the material valuation uncertainty clause from all sectors, which in turn would see property funds reopen.
Nick Knight, head of UK valuation at CBRE, said: “In order to lift the clause, the main criteria is that we need to see a more normal level of activity, so more transactions in the marketplace. Once activity starts to return, the clause will be lifted from that sector.
“We’ve already lifted the valuation clause from some sectors, such as standalone supermarkets.
“But the main sectors these property funds invest in are office space, industrial and retail. There is some activity in industrial at the moment, but not much activity at all in offices and retail. The clause will probably remain in place longest for retail.”
The 11 UK property funds available to retail investors, with £12.8bn of assets between them, have been suspended since the third week of March.
Portfolios were gated because the coronavirus crisis had caused “material uncertainty” in the UK property market, meaning valuers were unable to value the assets within the funds with the same degree of certainty as would otherwise be the case.
Rupert Johnson, global head of valuation and advisory at Knight Frank, agreed that “not many businesses” were “anywhere near back to normal” yet.
Mr Knight said one of the biggest things currently causing uncertainty, and holding back transactions, in the market was the fact the government had suspended forfeiture provisions within leases and had prevented the use of statutory demands to take rent.
Because commercial properties in the UK — held by property funds — are now unable to receive guaranteed income or yield from rent, potential buyers have held back from making transactions in the market.
To speak to an adviser, contact us on 0191 384 1008.