A joint report from the Investment Property Forum, British Property Federation and RICS has revealed new research on the size of the small investor community and their awareness and attitudes toward direct and indirect investment in commercial property.

This research showed that there are few property investment products that fully meet the needs of small investors. However, it also showed that if more appropriate indirect property investment products were to be created, there was a potential pool of additional investment for property of the order of £35 billion from small investors.

The small investor segment is known to be significant, but until now there have been no figures available that quantified it. This report addresses this information gap and reveals that there are at least 6.5 million active individual investors in the UK, together with approaching 200,000 pension funds and over 100,000 charities that have assets of less than £30 million. In total these small investors have assets in excess of £700 billion.

Individual investors are the largest portion of the small investor segment and have assets amounting to £654 billion, excluding investment in their own homes. However little of this is invested in commercial property. In total, just over 11% is invested in some form of property based investment. Direct property exposure amounts to £51 billion (8% of the total), with the bulk of this (£40 billion) accounted for by buy-to-let residential. Indirect property exposure, via more regulated investment products such as unit trusts, funds and shares, represents just 4% (£23 billion) of the total.

The conclusion of the report is that existing indirect investment products in commercial property do not appear to fully meet the needs of small investors, who want to invest in a liquid vehicle that offers investor protection, stability and exposure to direct property returns.

Despite a high level (54%) of investors being aware that commercial property is the best performing asset class compared to equities or bonds, over the last 3 years less than 10% have acquired property based investment products and only 5% stated that they were considering doing so in the next 12 months.

However, the research indicates that this attitude could change substantially if investors were given easier access to the commercial property market and had better education about the different products available. Quantifying this, investors say that their allocation of investment in commercial property would increase significantly from 4% to 10%, equating to a potential capital inflow to the sector of c. £35 billion.

Stuart Beevor, Chairman of the "Opening the Door to Property for Small Investors" project Steering Group, said:

"This is the first report of its type that seeks to quantify the size of the small investor community. It's a substantial segment and the research shows that small investors are not being well served by the investment market in terms of commercial property investment products. As a result, many investors have sought their own solution, turning to the buy-to-let market in substantial numbers, to the tune of £40 billion."

"This research provides strong support for the introduction of a UK REIT and the Findings have been sent to the Government in response to their consultation on the subject."

A summary of the BPF/IPF/RICS report "Opening the Door to Property for Small Investors" is available for download at http://www.bpf.org.uk/files/resdoc109214017820470-1.pdf

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