AREF Reports Stabilization of UK Commercial Property Market

The latest report published by the Association of Real Estate Funds suggests that some of the unlisted UK property funds have reported the first net purchase activity, which is expected to demonstrate increased investor confidence. Rachel McIsaac, chief executive at the Association of Real Estate Funds said that their research showed that the first 2 quarters of 2009 saw not only redemptions showing a significant slowdown, but also sales activity being positive. Let us remind that the British property market has witnessed significant challenges in the past 2 years, which were caused by the credit crunch and economic downturn that in its turn resulted in declined demand for commercial property investment and decreased property values. British property investors pulled their money out of the property market as the free-flow credit was squeezed, which caused significant redemptions in property funds. However, the report published by the Association of Real Estate Funds suggests that British market of property investment is now starting to stabilize. The Fund’s findings find proof in the report by CB Richard Ellis, a property services company, which stated that commercial property market reached a turning point in July 2009, when commercial property values in the UK started to rise for the first time since 2007. According to CBRE, British commercial property prices saw a 0.2% increase last month. The Investment Quarterly study, published by the Association of Real Estate Funds showed an overall inflow of £52.4 million into pooled commercial property funds in the 2nd quarter of 2009 with a total of £320.4 million of new money flowed into pooled property funds in the 2nd quarter. It is interesting to note that the figures reflect increased investor confidence in the property market as the industry saw £203 million of new capital raised in the 2nd quarter of this year, which represents a 36% increase the 1st quarter of 2009.