CB Richard Ellis comments on latest ons quarterly institutional property investment

Institutions invested over £1.2bn into commercial property over the second quarter of 2007, up from a net disinvestment of £300m the previous quarter. This level of investment is the strongest since Q3 2006 and is in line with a trend of resurgent investment levels in Q2 over the last three years.For the first time in a year, all three institutional groups were net investors over the three months to June. Unit and Property trusts continue to dominate however, with net investment of $688m, largely on par with last quarter. Insurance funds acquired a net £500m over the quarter, following three months of disinvestment. Insurance companies are historically most active in Q2 and therefore this probably does not represent any dramatic shift in strategy. Whilst positive, net investment by pension funds was negligible but a sharp contrast to the withdrawal of over £900m from commercial property over the previous two quarters.

Commenting on the recent release of the Office for National Statistics' (ONS) figures for institutional investment in property for the second quarter of 2007, Greg Nicholson, Chairman, Capital Markets at CB Richard Ellis, said: “The strong positive inflows into property in Q2 showed a marked rebound in activity after the small net outflows seen in the first quarter. Against a background of increasingly cautious investor sentiment, institutional demand appears to have held up well. Nonetheless, with the ongoing credit and financial market uncertainty, it will be the Q3 and Q4 figures that will probably provide more insight into how sentiment has been impacted by current events.”

NOTES TO EDITORS: The main points of the ONS findings are:

• Second quarter net institutional disinvestment was £1.2bn, following disinvestment of £325m in Q1. Trends over recent years have shown that Q2 is a particularly strong quarter for institutional investment.
• All institution types were net investors in Q2, unit and property trusts increased their exposure to commercial property by almost £700m, on par with the previous quarter but slower than the second half of last year.
• Pension funds net investment was positive but marginal, whilst insurance input £500m into the market. Both pensions and insurance were net disinvestors the previous quarter.
• Combined purchases and sales of property were £3.1bn and £1.9bn in Q2, both down from the previous quarter.