Indirect investment market: Jones Lang LaSalle market commentary

UK market overview

Average secondary market pricing across all UK sectors has continued to improve, moving a further 0.76% closer to net asset value in January, to an average of -0.97%, writes Ashley Marks. IPD’s 2013 UK Quarterly Property Index showed a 4.3% capital return for the year. Unlisted funds did better, the JLL Balanced Fund Index showing a 5.0% capital return,  or 9.9% taking into account the effect of secondary market pricing. This reflects both strong demand for the balanced fund sector and perhaps the best- in-class management of the funds universe.

Balanced funds

Pricing continues to remain at offer price for the majority of balanced funds. A number of funds, including BlackRock, CBRE Property Fund (formerly CBRE Lionbrook), Hermes PUT, Lothbury PUT and Schroders UK Property Fund reported substantial inflows totalling more than around £130m during Q4 2013. Demand for the diversified/core sector is expected to continue in Q2 2014.

Retail funds

Pricing continues to improve for retail funds. Many investors are seeking core, dominant and long-let opportunities. Pricing in both Henderson’s and Standard Life’s shopping centre funds improved to a discount of around 1.0%, from around 3.0% and 2.50% respectively. Lend Lease Retail Partnership is seeing continued interest at around a 2.5% discount, compared with -4.0% in December.

Of the retail warehouse funds, British Land took up its pre-emptive rights over the redemption queue and bought around £66.8m of units in Hercules Unit Trust, at a 3.8% discount to NAV, raising the company’s stake by 8.0% to 57.2% (or around £495m).

Industrial funds

Industrial pricing continued to improve during January, largely driven by constrained supply. L&G IPIF and SWIP Airports pricing moved to premiums of 5.0% and 2.0%, from 4.5% and 1.0% respectively.

Office funds

Of the actively traded office funds, pricing remained unchanged for CLOF and WELPUT, both remaining at discounts to NAV of around 3.5% and 2.0% respectively. CLOF confirmed that it had received approval from investors to extend the life of the fund, which may have a positive impact on the fund’s liquidity.

Continental Europe

Demand within Europe remains buoyant, as investors are increasingly comfortable with the economic outlook, although supply is constrained.