Its a point taken up by Peter Hewitt, who runs the Columbia Threadneedle Global Managed Portfolio trust, a vehicle that invests in other investment trusts.
He says he has reduced his property exposure, and presently only owns assets such as Land Securities, which owns large landmark buildings in London, as well as a trust that owns care homes, and so should benefit from changing demographics rather than suffer as a result of those, which is the case for companies that own assets that might perform less well as a result of changing societal patterns, such as the tendency to work remotely.
Culture clashes
Norris says that at present only around 16 per cent of commercial property assets in the UK have the right energy efficiency rating now.
He notes an opportunity may present itself for a development company such as Derwent, which he feels has the resources and inclination to buy up such properties cheaply and redevelop them to the right energy efficiency standard.
When it comes to the potential for regional or thematic differences to persist for the long-term, Hussein says a “bifurcated” market is being created based on location, with empty offices tending to be clustered together, while offices that are lettable are also centred in prime locations.
He says: “There is already evidence of a ‘brown discount’ in action. In the US and Europe energy efficient assets are showing stronger investment performance compared to their inefficient counterparts, particularly in the office sector.
"The growing demand for sustainable properties, combined with the shift to remote work, poses a significant challenge for older office buildings. These properties risk becoming stranded assets if their owners don’t take action to bring their buildings up to a higher standard."
Peter Dalgliesh, chief investment officer at Parmenion, says he continues to favour property within balanced portfolios as a way to add diversification within portfolios, but adds that the demise of open-ended property funds means one can only access the asset class via real estate investment trusts, products he is wary of as he feels they require an investor to take equity market risk, rather than be a diversifier away from equity market risk.
Ben Yearsley, investment director at Fairview Consulting, has been buying UK property trusts recently. He says: “We have probably had the blow out in the sector, with capital values falling, but we have probably seen the bottom of that now. So as an investor maybe you have missed the bottom, but with a 5 per cent yield, that’s fine as it’s more than the 4 per cent yield on government bonds right now.”
