The higher inflation environment of recent years has curtailed the supply of new commercial property at the top end of the market, and that is likely to boost returns despite wider uncertainty.
This is according to investment manager Matt Jarvis, who runs the £1.1bn L&G Property fund.
The reputation of open-ended property funds in the UK has been blighted in recent years by a number of such products being forced to suspend redemptions as a result of liquidity concerns.
Investor sentiment was further dented as higher bond yields reduced the appeal of the income generated from commercial property, higher interest rates increase the debt servicing costs of the property owners, and markets questioned the future of commercial property in a world where remote working has become more commonplace.
The fund manager said the prices of some higher quality offices have fallen by 25 per cent below the previous peak.
Jarvis said all of those issues have led to a decline in the supply of new, higher quality commercial property assets coming to market.
This is at a time when rate cuts, declining inflation, and a relative normalisation of working patterns means that demand has started to pick up, but the supply of such assets has not yet caught up with the increased demand.
The net effect, in his view, was that rental prices for higher quality offices have started to rise, and, as the yields available rise, demand to own the asset class will increase, with the net impact being that prices rise.
On the liquidity point, he said his fund has moved to a hybrid approach, and now owns a combination of physical property assets and the shares of stock market quoted property companies, or Reits.
He said he believed the exposure to the Reits meant the fund can have constant access to liquidity, as well as providing an exposure to a wider range of property assets.
Jarvis also said that while Reits are quoted on the stock exchange, and therefore are listed equities, over an extended period of time, the return from those assets was more in line with the returns from property than from the equity market.