Thank you for sharing!

Your article was successfully shared with the contacts you provided.

(To read more on the industrial market, click here.)

LONDON-Fund manager F&C Property Asset Management expects British commercial property to produce total returns of 12% to 13% in 2005, but there may not be the rental growth investors had expected. “There is some concern that the investment market has run ahead of itself this year,” F&C officials say. “Prospects for further yield compression are limited, and economic-growth rates would be unlikely to stimulate rental growth significantly. “If some buyers are found to have overpaid, there may be some adjustment to come.”

UK commercial property, according to Investment Property Databank, produced total returns of 4.5% in Q2 of this year and 17.5% over the past 12 months. For the first time in a year, it lagged UK equities with the FTSE All-share index returning 18.7%. But F&C notes that over three, five and 10 years, commercial property has outperformed both stocks and gilts as money has flooded into bricks and mortar.

The fund manager expects retail property to deliver the best returns at 13%, office to deliver 12.4% and industrial 12%. Over the five-year period from 2005 to 2009 it forecast average returns of 9.4%.

F&C spokespeople say the British market continues to be buoyant with about euro 63.77 billion ($77.94 billion) invested in commercial property in the past year, some 25% higher than a year ago. Average UK transaction yields fell to 5.7% at the end of June compared with 6.1% at the end of March.

While retail continues to be the top performing property sector, with annualized returns of 17%, the fund manager sees this growth slowing over the next few years. “While some of the recent gloom may be overdone, the town-center element, in particular, could lose some momentum by the end of the five-year forecast period,” they say. The fund manager added that, while UK offices have staged a marked recovery on the back of strong investment demand, occupier demand is still muted, and this could impact rental growth.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt. NET LEASE Spring 2021Event

This conference brings together the industry's most influential & knowledgeable real estate executives from the net lease sector.

Get More Information


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.