Standard Life cuts UK property fund values

One of Britain's biggest property fund managers Standard Life Investments has cut the value of some of its UK commercial real estate funds by 6.7 percent, in a sign of growing distress in the sector.
A spokesman for Standard Life said on Saturday that pension and life fund investors had begun to shift money out of property and that the move would help to cover the high costs associated with liquidating property holdings including stamp duty. "It's in response to a net outflow situation," he said, but was unable to go into further detail.
He also warned that other British property fund managers could be about to do some similar as investor sentiment towards property soured, raising the spectre of a run on the asset class as funds which had attracted billions of pounds in recent years were forced to sell properties on the open market.
"We may be the first, but we may not be the last," he said. At the Reuters Real Estate Summit last month property company Brixton warned of a potential backlash from retail investors and a surge in redemption's as property returns slowed after a long boom.
"The man on the street is flooding into commercial property and has been for two to three years now, arguably just at the time as the cycle is about to wane and turn, which is massively dangerous to the credibility of our market, particularly with the REIT legislation just kicking off," Chief Executive Tim Wheeler said.
Consensus expectations data from the Investment Property Forum show experts from the UK commercial property industry have long expected total returns - which combine rental income and capital growth - to broadly halve this year, and to halve again next year, after averaging 18-19 percent in 2004-2006.
But sentiment has worsened in recent weeks as property company IPOs have been cancelled and interest rates have risen. According to the property derivatives market, UK commercial property prices could fall by about 2 percent next year, despite strong rental growth in some subsectors, notably central London offices.