20 billion pounds is now locked away from investors with the recent decision to freeze withdrawals from funds worth over £9 billion by BlackRock, Schroders, and Legal & General group. These funds are now cut off from professional investors, joining recent decisions to freeze £11 billion from mom-and-pop clients.
Shutdown Affecting Commercial Market
With funds now cut off from investors and worries over valuations and rental income, the commercial market is mired in uncertainty. Most commercial investment funds allow monthly or quarterly withdrawals, contrasting with retail funds which tend to allow daily withdrawals. Professional investors tend to be long term and are less likely to pull their money quickly. Thanks to this, these funds haven’t experienced the outflows that have plagued similar retail accounts.
However, now that the daily funds have been suspended, attention has been turned to monthly and quarterly funds. With the rents due March 25 not received, the impact of the economic uncertainty is looming over the commercial property market.
Not All Funds Shut Down
Some funds have chosen not to close down, instead, marking down the value of the funds. The AEW U.K. Core Property fund has applied a 14% reduction to its value, meaning that any redemptions would be worth 14% less than the fund’s net value.
Property managers and investors will be dealing with more worries as their funds either sit down or decrease in value. With rents not being paid, good property management software may help in this trying time.
What to Expect
Anyone in the commercial real estate market will be buckling down while this situation blows over. Most of the effects are a matter of time and if the government does anything about issues like rents for commercial properties. Until the lockdown is over, many businesses that rent these spaces are secure down and can’t make any profits or pay rent for the space.
Many businesses are also getting forced to close as the lockdown slowed no signs of being lifted. This leaves many commercial spaces without any tenants, and they are unlikely to find more while the lockdown is ongoing. This may leave many owners and investors scrambling to make profits from their investments.
Investment Not Recommended
Now is definitely not the time to invest in any properties. Between uncertain values and an unknown length of time before normal business can resume, it’s best to hold off and save your money for when the market improves.
Those who manage commercial properties will be facing a hard time as well. So long as business is frozen, they’ll have a hard time managing their properties, particularly since in-person management isn’t a good idea right now. A good property management software may help in the short term at least.
With so many funds frozen and more likely on the horizon, the commercial property market in the UK is on ice for the foreseeable future. Those currently in the market need to hunker down, and those who wished to invest should hold off until the situation improves.