Ainslie McLennan, Co-Manager of the Janus Henderson UK Property PAIF, outlines the key themes and challenges shaping the UK commercial property market.

  Key takeaways:

  • COVID-19 has accelerated market shifts that the PAIF’s property investment team has been anticipating, notably within retail, industrial and logistics.
  • The fund retains a broad mix of high-quality assets across sectors and geographies, with a focus on location, depth of occupational demand, strength of tenant, lease length and asset management.
  • Sustainability continues to be a focus for the fund, which is committed to becoming operationally net zero carbon by 2030.


Like all asset classes, UK commercial property continues to be impacted by COVID-19 but in different ways to equities and bonds, highlighting its benefit as a source of steady income and a diversifier within a balanced portfolio.

While property did not experience the extreme price movements that many equity investors had to absorb, the lockdowns and their impact on some businesses to pay rent, along with the market uncertainty clauses implemented by property valuers across the commercial market, affected the asset class.

Transaction volumes remain considerably lower than in any other recent market cycle and are taking longer than the typical 12-week period. This is more to do with macroeconomic uncertainty, including Brexit, than pricing. Unsurprisingly, retail and leisure, impacted the most by the pandemic, are experiencing the least investment activity.

However, optimistic news regarding COVID-19 vaccines and more clarity on Brexit should see small steps towards returning to the ‘new normal’. This over time should be positive for commercial property, a tangible asset that supports our day-to-day social and working life.

Long-term trends

COVID-19 has accelerated the market shifts that we have been anticipating and for which we had been relatively well placed. The structural transformation within retail to online shopping has been an ongoing theme in the wider market. COVID-19 fast-tracked this with shopping centres, department stores and regional high streets being hardest hit.

Administrations are likely to continue in this challenging economic environment. We have always focussed on the strength and resilience of the underlying tenant base, as well as diversification across sectors. Year to date, a value equating to just 0.5% of rents demanded has been written off in the portfolio owing to administrations and tenant defaults, where three of those are COVID-19 related*.


Areas within retail that are proving more resilient are supermarkets, London high streets and retail warehouses. This is where the fund’s main holdings in the retail sector are focused and is why we believe our portfolio is better positioned to weather the changes. Shoppers often still want the ability to feel, try and touch an item before buying it so it is a case of landlords and occupiers adapting to consumers’ needs.

Amazon, Croydon Resize


A distribution warehouse in Croydon, South London, owned by the fund and occupied by Amazon. Source: Nuveen Real Estate. As at 30 November 2020.

We continue to like the industrial and logistics sectors because they are beneficiaries of the rise in online shopping, which the pandemic continues to encourage. The return of office workers is a stop start process, but we do not foresee issues at the only offices owned by the fund located in London and the South East because they are not high-rise.

Fund focus

The fund retains a broad mix of high-quality assets across sectors and geographies, with a focus on location, depth of occupational demand, strength of tenant, lease length and asset management. The latter includes negotiating existing leases with tenants to deliver longer or more favourable terms and refurbishments. Sustainability has also been a significant focus for the fund since 2012, when its first on-site renewable energy system was installed. We have committed the fund to become operationally net zero carbon across its portfolio by 2030.

We expect the UK economy will remain challenged into 2021 due to the pandemic and Brexit uncertainties. Having resilient tenants occupying well-located assets has served the fund well in 2020 and we expect that will help to continue to positively differentiate the fund during 2021 and beyond.


*Source: Nuveen Real Estate, 30 November 2020.