Sharp increase in commercial property fund investments

PropertyFunds: Irish Life has reported a sharp increase in funds going to it for investment in the commercial property markets in Ireland and the UK.

Over the past six months the company invested €105 million in open-ended property funds - an increase of 75 per cent on the same period of 2004.

Several other funds which concentrate on the commercial property markets are also taking in significantly more cash from private investors disillusioned with the performance of equity markets.

Irish Life says its portfolio bond is designed for long term investors who are looking for a better return than they get from deposit accounts but don't want the higher risks that go with investing in equities.

The Irish fund has invested in 40 commercial properties, including the St Stephen's Green and Ilac shopping centres, Hume House office building in Ballsbridge, Airside Retail Park and Navan shopping centre.

With the UK fund, three-quarters of the money is invested in directly-owned properties with the remainder going to indirect property vehicles.

The company recently spent a further €41 million (£28 million) on three investments in Manchester, Bristol and Cambridge, bringing its directly-owned properties in the UK to 14.

The most expensive of these, costing €12.96 million (£8.8 million), were two shops at 25/27 Petty Cury in Cambridge, let to Nationwide Building Society. The property is located opposite the main shopping centre.

A further €8.5 million (£5.8 million) was spent on a retail unit let to The Body Shop at King Street, Manchester.

The third purchase was a warehouse of 6,595sq m (71,000sq ft) let to Coors Brewers at junction 16 of the M5 motorway outside Bristol. The lease has another 16 years to run.

Significantly, Irish Life has not given details of either the rents or yields on these three purchases.

Irish Life's investment marketing manager, Karl Symes, says that investors in their funds are not usually looking for the more speculative levels of capital growth that others who geared up were often looking for.

The main attraction for most investors was the potential for steady levels of rental income. "The potential to increase those returns further through long term capital growth is obviously very welcome but it's often a secondary factor."