Commercial property funds return less on investment

The debate over property continues as commercial property funds in developed countries begin to return less.

The debate over property investment has intensified as results from recent property companies have triggered a number of people pulling their money out of property in the United Kingdom.

The UK has really become a microcosm of the property investment situation in all of the world's developed countries and it is really there that the debate over property investment has raged the fiercest. It seems that every day people are publishing statistics or opinion pieces either in defence of or attacking property investment in one of the UK's many urban centres.

A recent report that was released by the Association of Real Estate Funds (AREF for short) has shown a massive decrease in investors over the last quarter of 2007. Commercial property funds has seen withdrawals from their clients increase almost 1,200 per cent over the those three months and this in turn has triggered sell-offs by many of the companies of their property holdings.

The withdrawals would probably have increased in size and number over January had not most of the large property funds made moves to stop their clients from withdrawing money temporarily.

Another interesting conclusion that the report reached was that over the last 17 years, investment directly into property markets has outperformed parking money with property funds in order to let them pool the money with that from other investors and go for big ticket items.

While personal investment in the UK had an average annual return of 10 per cent, the same amount of money invested in a property company returned between nine per cent and 9.9 per cent depending on the type of company that was being utilised.

According to Rachel McIssac, who is the CEO of AREF, the figures show that recent turbulence in the market has been severe. However, she has also stated that while turbulence is there, property funds still represent a sound investment choice.