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LONDON-Property in the UK is set to outperform equities for the second consecutive year, according to Insignia Richard Ellis. And the firm forecasts that, after hitting their lowest level since 1995 this year, property returns will improve over the next three years as the economy recovers momentum and occupational markets strengthen.

In the key central London office market overall take up for the year is expected to be in the region of 14 million sf. Although this level is lower than the 18.6 million sf seen in 2000, it is higher than the five-year average.

In the West End market many requirements have been put on hold and availability has risen by 25%. Prime rents in this area also saw their first drop since 1992, down to £77.50 ($112) per sf from £82.50 ($119) per sf at the start of the year.

But the City saw strong take-up of 1.7 million sf during the three months to September 2001, up 21% on the previous quarter. Insignia Richard Ellis is forecasting that take-up will reach 5 million sf this year with top rents remaining unchanged at £63 ($90) per sf.

And the regional office locations have experienced healthy take-up recently. Levels of supply are low with severe shortages of Grade A space in Birmingham and no development completions in the pipeline for 2002 in Leeds.

IRE’s Research Director Peter Damesick, said: ‘The keys to property’s relatively favourable performance in this cycle are low interest rates and lack of speculative over-supply. Property’s greater stability in this cycle owes much to the low inflation environment, while the economy at large and the stock market have suffered the consequences of over-investment in technology and telecoms.’

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