* Aviva Investors to be net-buyer of UK property in 2010
* Sees risk recovery stalling end-2010
* HSBC GAM warns against over-optimism on UK rents
By Daryl Loo
LONDON, Nov 4 Britain's commercial property
market recovery could be short-lived, if yield-chasing investors
bid up prices without a corresponding improvement in the
economy, two major property investors said on Wednesday.
In the third quarter, unlisted UK property funds raised the
most cash from investors in two years, a report showed this
week, as values rebounded in August after falling 45 percent
from their mid-2007 peak. [ID:nL335486]
"There is significant scope for yields to rally from here,"
Aviva Investors head of real estate investment strategy David
Skinner told Reuters on the sidelines of an industry conference.
"But clearly if it happens too quickly with no recovery in
the underlying income stream, there is a risk the recovery in
capital values that is underway stalls towards the next year and
into 2011," he said.
Aviva Investors (AV.L), the asset management arm of the UK's
second-largest insurer, sees rentals in the UK falling 15
percent between now and mid 2011, taking the total drop to about
25 percent as a weak economic recovery stifles occupier demand.
It expects to be a net buyer of UK commercial property next
year, however, as current yields of 7.5-8 percent remain
attractive within a multi-asset context, Skinner said.
In a separate report, HSBC Global Asset Management (HSBA.L)
similarly said the market's recovery could be short-lived due to
a lack of fundamental drivers, and cautioned against taking
over-optimistic views of a rental recovery.
"There is a growing risk that a dramatic improvement in
sentiment drives up prices to a level that fails to reflect
adequately weak occupier markets," Guy Morrell, manager of the
HSBC Open Global Property Fund, said in a statement.
"If so, it will be the wrong sort of recovery in the sense
that it will be unsustainable and would leave the market
vulnerable for a further decline," Morrell said.
(Reporting by Daryl Loo; Editing by Andrew Macdonald)
(See www.reutersrealestate.com for the global service for real
estate professionals from Reuters)