Market Reports: Ireland's largest property unit trust, IPFPUT, has reported overall returns of 12.5 per cent from the property market in 2003. The result, which was considerably better than expected, will give an important shot in the arm to the pension industry which has been reeling since the downturn in equities.
IPFPUT manages more than €649 million in property investments for leading pension funds such as CIÉ, RTÉ, TCD, Guinness and Aer Lingus.
The fund turned in a particularly strong performance in the final quarter of 2003 when returns reached 3.4 per cent. Retail was once again the strongest sector, showing overall returns of 10 per cent. Total returns for the year of 12.5 per cent were split almost equally between capital and income with capital returns of 6.5 per cent and income of 6 per cent. Retail showed the most significant growth, rising by 28 per cent for the year compared with 7.5 per cent from offices and 8.1 per cent from industrial investments.
The trust says that a growth in capital values was driven by positive yield movements, particularly in the retail sector. In the second half of 2003, a downward adjustment in office yields reflected the strength of market demand for well let office investments. On the income side, the second half of 2003 witnessed the beginning of a downward trend in office and industrial rental values that reflected weaker occupier demand.
IPFPUT says that the last quarter of 2003 pointed up the weak prospect for rental growth in both the office and industrial sectors with estimated rental values either held at current levels or reduced. "We believe that this trend will become more pronounced in 2004 with, for the first time in over a decade, the prospect of city centre office rent review results coming in ahead of the rentals being achieved for new office buildings. We anticipate that the next two years will be difficult for the office letting market but we could see an upturn in occupier demand towards the end of 2005. The retail sector should continue to offer investors medium term growth prospects."
The trust has over 57 per cent of its equity in the office market. For some time past it has been modernising its office holdings and focusing on larger lot sizes that are well placed to generate future income and capital growth.
IPFPUT also has a 50 per cent stake in the Airside Retail Park near Dublin Airport. There it has just agreed to let a retail warehouse of 1,000 sq m (10,764 sq ft), leaving only one unit available in the park which has a total retail area of 24,900 sq m (268,021 sq ft).
