Opening the door to more storeys in your portfolio

Commercial property can offer good returns and stability

They enable investors to share the ownership of shopping centres, office blocks and factories. Property funds can either purchase the buildings themselves or shares in property companies.

Typically, when a commercial property fund buys a property, it tends to have a contract over 25 years, with known rent rises. This provides a very long-term, stable, increasing income with the potential for capital growth as the value of the property increases.

Commercial property funds could also help balance the risk in a portfolio because they are not correlated with bonds and equities.
Investors will also be able to invest in Real Estate Investment Trusts (REITS) from January 2007. These are tax-efficient property funds quoted on the Stock Exchange and have been successful in the US, Japan and Australia.

The proportion of money you might consider investing in commercial property will depend on your age and attitude to risk. A lowly correlated investment with additional steady yield could be attractive but it predominantly appeals to those who require the income stream more immediately, so is most likely to appeal to retired or retiring investors.

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