Meanwhile specialist funds focused on warehouses, student accommodation, residential and healthcare properties can be bought on discounts from 16pc to as much as 64pc.
There’s a similar trend in Europe, where the London-listed Schroder European Real Estate and Tritax Eurobox Reits respectively languish 38pc and 42pc below NAV.
All this means an attractive “double discount” in TR Property that should start to unwind as the Bank of England starts to slowly cut its Bank Rate later this year.
Phayre-Mudge says Reit shares plunged in 2022 and 2023 because they were “an easy way to play a negative view on rising interest rates”. The opposite should now apply as interest rates come down in Britain and Europe.
Investors have seen how this works: TR Property’s own shares soared by 34pc in the past nine weeks of 2023 as expectations of early rate cuts intensified. The shares have retreated by 9pc this year amid a realisation that inflation will be hard to beat and interest rates may be high for longer.
The important point, though, is they are unlikely to rise as the economy feels the pain of high borrowing costs.
“Whether interest rates will fall quickly or not, they have peaked,” said Phayre-Mudge.
Phayre-Mudge, who has managed TR Property since 2011, said the lifting of rates pressure would highlight an astonishing fact about commercial real estate: despite the crushing of share prices in the past two years, rents have grown in most areas.
He said the rise in rents reflected strong fundamentals as limited supply of properties combined with strong tenant demand and the prevalence of inflation-linked leases. The supply-demand imbalance is particularly acute in logistics hubs that serve the growth in e-commerce, but is also evident in offices, where employers are keen to attract workers with sustainable, “best-in-class” buildings.
