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LONDON-Property now outperforms all other UK asset classes over one, three, five, ten and 15 years, according to the latest Baring Houston & Saunders Property Report. And given this and the recent volatility of the equities market, an increasing number of institutional investors are reviewing the structure of their portfolios and increasing their allocation to the property sector, with some investing in the sector for the first time.

Within the property sector, BH&S warns that rising vacancy rates and the expected peak in development completions next year mean that exposure to Central London Offices should be minimised. The same applies to offices along the M4 corridor which are still suffering from the distressed state of the telecoms and computing market.

The retail sector is currently providing the best performance, but BH&S warns that should interest rates rise, retail sales are likely to slow making the sector considerably less attractive. The broker highlights industrial property as the sector with the most potential: vacancy rates should moderate within six months and the increase in manufacturing output should improve demand.

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