UK property equities

Real Estate Capital UK commentary

UK property stocks rose 1% in February, compared with a wider stock market uplift of 2.8%; UK REITs share prices rose 0.8%. Capital values rose by 1.3% on IPD’s monthly index for February, while rents fell -0.1%. All-property prime initial yields fell 12bps to 6.8%.

Liberty’s demerger into a new REIT holding its shopping centres, US business (earmarked for sale) and Indian investments, and a non-REIT property firm holding its Central London assets, was greeted favourably. But its shares fell on worse-than expected 2009 results showing a 13% fall in its portfolio value.

The weak occupier market hit industrial REIT Segro, which raised its vacancy rate with last year’s takeover of Brixton. Segro said it will focus on developments in France, Poland and Germany.

Central London specialist Derwent has earmarked £200m for developments, saying rental recovery offers better prospects than buying overpriced investments. Its full-year results – a 20% uplift in net rental income and a 3.3% fall in the portfolio value – underlined the strong central London recovery. The first major REIT flotation of the year was announced in early March; Metric Property has raised £175m to invest in re-priced retail property.