Retail continues to be the strongest sector and annual rentalgrowth in the sector picked up from 1.6% in March to 2.2% inOctober. However GVA Grimley expects rental growth to slow to 1.6%next year because of an anticipated slowdown in retailexpenditure.

The office sector is weak, influenced heavily by the collapse inoffice rents in London and the South East. Overall UK office rentalgrowth slumped to -2.4% in the year to October 2002 against +4.8% ayear ago Away from the South East, rental growth is far more stablearound the 2% per annum mark where it has stayed for nearly 18months.

However despite slow rental growth, investors are still seeingattractive overall returns from property because of the yield shiftthat is driving capital growth. In the year to October propertyproduced an overall return of 10.2%. Returns are expected to reduceslightly next year on the back of weak rentalgrowth and stableyields.

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