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LONDON-Investment activity is set to slow in the UK as institutions and property companies adopt a more cautious stance amid a continuing weakening of leasing market fundamentals. Overall, net investment into UK commercial property is expected to reach £14 billion ($23 billion) during 2003, against £17 billion ($28 billion) in 2002.

The data, from DTZ’s latest Money Into Property report, is accompanied by a poll of property fund manager that shows most now expect equities to continue to outperform other asset classes in 2003. The managers expect commercial property to deliver total returns of around 6% this year, the lowest return since 1995, whereas equities are expected to deliver returns of 11% and government bonds 4%. Property returns are expected to improve moderately to 7% in 2004.

But among those that are still buying property, appetite for retail parks and retail warehouse units remains strong. Despite continued tough conditions in the manufacturing sector, standard industrial units and warehouses continue to feature high on their list of priorities. The office sector continued to be the least favoured commercial sector, particularly M25 towns and Central London offices.

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