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Will property investment trusts bounce back in 2021?

Will property investment trusts bounce back in 2021?

by Cherry Reynard from interactive investor | 13th January 2021 12:23

Some sectors of the property market could be ripe for a revival. Cherry Reynard asks experts for trust tips to profit.

In early December, the government extended its ban on evicting commercial tenants. While it gives UK companies some much needed breathing space, it extends the pain for property funds. They have faced 12 months where tenants haven’t been obliged to pay rent, but can’t be replaced. It has cut off their income stream and depressed the value of their buildings…

Trust discounts widened in 2020

Unsurprisingly, this has had a disastrous impact on returns for commercial property investors. The average property investment trust is down 15.6% year-to-date in mid-December. This weakness can partly be explained by a widening of the discounts, which in 2020 reached up to 50% in some cases. The open-ended UK Property sector is down a more modest 3.5%…

So far, so gloomy. However, it is important to point out that some parts of the commercial property market have been more resilient. Specialist property trusts focusing on growing segments have, in some cases, been beneficiaries of the pandemic…

Light at the end of the tunnel?

Richard Williams, property analyst at QuotedData, says: “The retail sector has been in the press almost on a weekly basis with yet another retailer failing – but the writing has been on the wall for that sector for some time.

…Williams adds: “The trend to online retailing has accelerated during the pandemic, which has resulted in a surge in demand for space. Demand for space has also come as occupiers look to shore up their supply chains having suffered a shock at the beginning of lockdown as the flow of goods from Asia all but stopped and panic buying ensued.”

…Williams points to Tritax EuroBox (LSE:BOXE), which is still trading at a discount and was recently given an endorsement by Aberdeen Standard Investments, which acquired a 60% stake as it looks to grow in the logistics sector.

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