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Where to Look For Both Income and Capital Gains in an Uncertain Property Market

Ramsay Duff, investment director at Maven Capital Partners

Commercial property investment hit £70bn last year, the highest since 2008, and the market was booming. But following the UK's unexpected vote to leave the EU, this wave of optimism has faltered, amid the threat that large corporations will counteract the negative fallout from Brexit by relocating their staff to offices overseas.

While this poses fresh challenges for investors in the property sector, there are nonetheless still opportunities for those seeking both income and capital growth. These two objectives are often at odds with one another: assets with an emphasis on capital gains are often not ideal for generating income, and vice versa. But in our view, two asset classes in particular present striking investment opportunities: the student accommodation and hotel sectors.

Given the recent fall in property values, investors should consider a twin-track strategy. The first step is purchasing and holding assets while values are low and yields correspondingly high and running them for income. A good way to achieve this is to buy and renovate - for example, to acquire non-income generating property assets, such as empty office space, and transform them into hotel or student accommodation earning steady revenues. As the market recovers, they will then be well positioned to realise the capital upside when the opportunity arises at a later date.

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