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September 30, 2008

Pension funds have confidence in commercial property sector

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by Lin Freestone

Pension funds have confidence in commercial property sector

The results have just been published of a survey carried out in June 2008 with 200 UK pension fund managers, trustees and investment consultants.

Conducted by the Pensions Management Institute and PRUPIM, a division of Prudential which specialises in property investment, the research indicates that more than half of UK pension funds plan to preserve allocations to commercial property over the medium-term, irrespective of market instability.

A further 25% of the pension fund managers questioned said they intended to increase their commercial property portfolios. The remaining 25% had plans to reduce their asset allocation to commercial property.

At the time the survey was conducted in June this year, the value of UK commercial property had lost a fifth of its value in 12 months. Recent figures indicate that average prices have now fallen by 22% since the commercial property market was at its peak in June 2007.

So despite the quite considerable falls in the value of shops, warehouses and offices, it is considered to be reassuring that institutional investors still have confidence in the market.

Paul McNamara, head of research at PRUPIM, said that the findings confirm the long-sighted nature of pension schemes as investors and it is reassuring to find that pension fund managers and trustees still see opportunities in both the UK and overseas commercial real estate markets over the next three years.


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