Luke Hyde-Smith, head of fund selection at Waverton says “Property assets undoubtedly face some unique challenges due to the Covid-19 crisis and the resultant lockdown imposed by governments globally.
"Certain sectors have been extremely resilient, such as supermarkets, healthcare and logistics, while others, such as those operating in more challenged areas including retail, office, leisure and hotels have been more negatively impacted.
"Many trends in place have accelerated due to Covid-19 and now more than ever it is important to ensure property investments are focused on areas underpinned with positive structural trends, such as demographics, technology and ongoing urbanisation.”
He added that property has often been viewed as a defensive asset class because the income comes from leasehold agreements, which are legally binding.
But he says that so many companies facing financial trouble and who may therefore be unable to pay the rent.
Investing in commercial property
Neil Birrell, chief investment officer at Premier Miton, says the multi-asset funds operated by his firm all have some investment in commercial property, and always will, with the amount each portfolio allocates to property determined by the risk level of each fund, while the multi-asset income fund tends to have more property than the non income funds due to the higher yield requirement.
He says: “I think we will always have property in portfolios. We tend to invest in Real Estate Investment Trusts (Reits) for property exposure.
"Because those are listed on the stock exchange, there is an element of equity risk with those, but there is liquidity. We don’t invest in open-ended property funds.”
Charlie Parker, managing director at Discretionary fund management firm Albemarle Street Partners says he thinks the performance of Reits will be broadly in line with that of the wider equity market, and so such assets do not, on their own, act as a diversifier away from equities.
Jason Hollands, managing director for business development and communications at wealth manager Tilney says: “Things were already dreadful for retail properties last year and 2020 is much, much worse as a result of the lockdown with shops and restaurants forced to close.
"Landlords are having to take a hit on some tenants and occupancy rates will soar as businesses fold.
"The lockdown has seen a collapse in retail sales, but it has also rapidly accelerated the rise of online shopping which means logistics and depots are in a relatively better place.
"The pain is also clearly extending into the office market, as the experiment of remote working is certain to mean that many businesses will be reviewing their future floor space needs with more flexible working arrangements in mind where these have worked well during the lockdown and not impacted productivity.”
