Fill your boots with property shares?
Shares in Real Estate companies have doubled since March 2009. However, financial website The Motley Fool - Fool.co.uk - believes further gains are possible.
Analysis has revealed that the Real Estate sector has recovered rapidly. Since 9 March 2009, the FTSE All-Share Real Estate Index has risen from 1,074 points to 1,983 points - a gain of 85%.
The rebound has, in some cases, pushed share prices above the companies' Net Asset Values (NAV). For example, Land Securities is trading at 18% above its NAV and Great Portland Estates is 26% higher.
But not all companies are trading at a premium to their NAVs. Segro and St Modwen are at small discounts to their NAVs. Quintain Estates is currently at a significant discount to its NAV, although this discount will reduce considerably when its current £183m fundraising is completed.
Leading Property Expert James Max told The Motley Fool in a recent Money Talk podcast that "we have just seen the largest ever rise in commercial property values in the last 20 years and investors should take stock"'. He said: "I think that we will see a big return of commercial property values over the next few years, and I think now is the time to fill your boots."
David Kuo, Director at The Motley Fool adds: "If the secret to investing is buying near the bottom, then now may be a good time to dip our toes into commercial property.
"There may be significant volatility in the sector as commercial property emerges from the doldrums. But the regular receipt of dividends can be a great leveler. Investors should also not underestimate the importance of reinvesting dividends to boost their long-term returns."
Top tips for investing in commercial property:
Research - look at company websites and dig deep into their portfolios and annual reports.
Assess the management team - look at their portfolio strategy, make sure you like it and understand it.
Shop around - look at where the company has properties and supply and demand in those areas.
Assess the debt - commercial property companies usually carry heavy borrowings, so check the amount and the timing of repayments.
Assess the risk - as with any investment, commercial property comes with various risks. Make sure you understand what you are investing in.
Spread your risk - don't put all your money in one company. Buy shares in a few companies to diversify your portfolio.
Ride the waves - commercial property is cyclical and tends to follow the economic cycle.
Data correct as of 1 December 2009