Canada Life Investments is a London based asset manager responsible for managing more than £38bn of equities, fixed income and property. We have been active in the UK for more than 100 years, having first established our life insurance business here in 1903. Our focus is on the long-term and we believe that active management is the best way to add value for our clients and generate superior returns.
Canada Life Investments currently manages £2.7bn of property assets, as well as managing a £2.7bn real estate loan portfolio. We have been active and committed investors in the UK commercial property market for over 50 years. We have gained significant experience of investing in and managing commercial property within the UK, Republic of Ireland and Western Europe. Our property investment professionals have a long tenure at Canada Life Investments, providing our investors with a depth of experience in managing and investing in commercial property throughout various market cycles.
Canada Life Investments has also been active in the real estate lending market for more than 25 years with a dedicated team of investment professionals who focus on commercial real estate finance. In addition to providing finance for the acquisition of good quality assets in the commercial property sector, we also provide finance to corporate borrowers such as regulated social landlords and businesses looking to refinance their real estate holdings.
As at 30 June 2019
Industrial: This sector has continued to see strong performance, with standard industrial units outperforming logistics. This is a result of a more diverse occupier base, growth in e-commerce generating expansion in ‘last mile’/urban logistics and limited new supply in markets outside of London.
There has been an unprecedented period of strong rental growth recently as occupiers across a range of sectors have continued to expand. Rents are now at record highs across the board.
We continue to be positive on this sector but we expect rental growth to slow as the exceptionally strong growth spurt is leading to affordability pressures for some occupiers. An easing of occupier activity is also expected as a result of economic headwinds and Brexit uncertainty.
Standard industrial units are expected to continue to outperform logistics in 2019/20, as availability of smaller units will continue to be constrained compared to prime logistics assets. This demand is expected to remain strong, especially in supply-constrained markets in London.
Office: The office sector has continued to defy expectations since the EU Referendum vote in 2016. It delivered positive rental growth in 2018, with major regional markets outside of London seeing the strongest growth, especially in the major city office markets as occupier demand has continued to outstrip supply.
Co-working and serviced office operators continue to dominate demand, accounting for approximately 20% of all take-up in Central London over the last year and are now expanding into the major regional cities.
However, investment activity was fairly subdued in the first half of 2019, reaching a total of £7bn, a 40% fall compared to the same period in 2018. Investor sentiment has remained cautious until there is greater clarity about the Brexit outlook.
We are forecasting modest growth in the sector in 2019/20 with returns expected to remain in the low single-digits under our main economic scenario. We expect the ‘Big 6’ regional office markets to continue to outperform the Central London markets.
Retail: The retail sector has continued to underperform other commercial property sectors as it has been hit by underlying structural change. Several major retailers have been downsizing or consolidating their store portfolios while others have entered into CVAs or administrations due to weak trading conditions and competition from online and mobile shopping.
Investment activity in the sector has remained subdued, with a total £3.3bn invested in the first half of 2019, a 24% fall compared to the same period in 2018. This reflects weakening investor demand towards the sector, while yields have also been moving out as rents fall.
Investment Principles & Strategy
We aim to deliver attractive long-term returns through a combination of income and capital growth, investing directly in commercial property. Our investment principle is based upon creating a well-diversified portfolio across different property sectors, geographic regions, lease maturities and investment sizes. We aim to maximise net income from a portfolio investing in high quality assets in strong locations with an emphasis on letting vacant space, lease renewals and re-gears, rent reviews, refurbishments and some development. We believe that risk controls and effective reporting are central to a well informed and managed investment style. Portfolio ‘risk’ is adjusted by reference to the economic cycle. We believe that detailed research and analysis of markets and individual stocks is vital in delivering optimum property returns. Evaluation of environmental factors is also important, as such risks will increasingly impact rental growth expectations and levels of depreciation.
Strategic corporate development
In October 2017 we launched the LF Canlife UK Property Authorised Contractual Scheme (ACS). The new fund has an a NAV of £402m1 and is designed to provide institutional investors with attractive long-term income returns and capital growth primarily through direct investment in UK commercial property assets. The fund is diversified across property sectors, geographic regions and lease maturities. To ensure an optimum risk/return balance, we invest the core of the fund in high-quality, income-generating assets and add tactical opportunities in more speculative or opportunistic investments and developments.
Funds under management are independently benchmarked by MSCI, the leading provider of performance measurement and benchmarking in the real estate sector. Benchmark fund performance is also provided by Morningstar and AREF.
The information contained in this document is provided for use by investment professionals and is not for onward distribution to, or to be relied upon by, retail investors. No guarantee, warranty or representation (express or implied) is given as to the document’s accuracy or completeness. The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. These views are subject to change at any time without notice. This document is issued for information only by Canada Life Investments. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available at www.canadalifeinvestments.com. Canada Life Investments is the brand for investment management activities undertaken by Canada Life Asset Management Limited, Canada Life Limited and Canada Life European Real Estate Limited. Canada Life Asset Management Limited (no. 03846821), Canada Life Limited (no.00973271) and Canada Life European Real Estate Limited (no. 03846823) are all registered in England and the registered office for all three entities is Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Asset Management is authorised and regulated by the Financial Conduct Authority. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.