This week IPD Executive Director Phil Tily has gone on record stating that the economic recovery is facilitating higher occupier demand in commercial property. A vital element of any diversified investment portfolio, what do Tily’s remarks show us about the importance of commercial property in the current market.
As an expert with a wealth of experience in both commercial and residential property, Simon Morris works as an advisor to investment funds. As such, Simon has noticed the recent trend typifying the commercial property sector as a result of the economic recovery, and suggests that Tily’s words further show why commercial property is such a lucrative investment opportunity in the current economic climate.
Furthermore, the sector provided impressive returns last month, measuring a rate of 3.7%, according to IPD figures. This contrasts with bonds, which recorded a growth rate of 0.1% according to IPD and stocks, which IPD figures show fell 20.7% last month.
“Occupier Demand is Now Strengthening.”
Tily’s words have shed illumination on the matter at hand. The Executive Director of the IPD UK and Ireland spoke on the issue at the IPD’s quarterly briefing at law firm Simmons and Simmons this week. He ascertained that the strengthening UK economic recovery is feeding through, rising occupier demand for commercial property.
Specifically Tily commented that “there’s a lot of talk about whether pricing is getting ahead of economic fundamentals, but the encouraging thing is that occupier demand is now strengthening.”
Occupier demand plays an essential role in property investment, as the strength of the property market depends on it, therefore the fact that more buyers are occupying commercial property means it’s in prime position to provide long term returns for property fund investors.
The Economic Fundamentals
Notably Tily’s words also raised key concerns. Specifically, he raised the question of whether pricing is outpacing economic fundamentals, as experts question whether there is a disconnect between capital values and the realities of the current UK economy.
Simon Morris comments that yes, there are issues facing the commercial property market as it stands, however rising occupier demand is a significant indicator of the strength of this area of the sector and its ability to provide property investment funds with sustained returns.