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LONDON-Cluttons has downgraded its commercial property forecasts for the second time this year, and it now believes that rents will fall almost across the board before the market stages a recovery at the end of 2002.The only sectors likely to escape the downturn are offices outside the South East and retail warehouses.

However Neil Chegwidden, Head of Research at Cluttons, is still positive about property’s future performance. He forecasts that all property total returns could dip to 5% next year and return to 8% by 2003. But he points out that an 8% nominal return equates to a 6% real return, which is higher than property’s 4.4% long-term average.

‘A very important feature of our forecasts is our belief that yields will not weaken significantly from current levels’ said Chegwidden. ‘With such a large yield gap compared to gilts and equities, we believe there to be a yield ceiling that will protect property from unlimited downside risk,’

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