"Prospects for 2007 are static, but there are more concernsabout 2008, particularly relating to yield increase and the impacton capital growth," says Charles Follows, the forum's researchdirector, in an accompanying note. Total returns comprise rentalincome and capital growth. The 16.5% consensus forecast for thesein 2006 compare with full-year projections of 13.4% and 11.2% inthe IPF's two previous quarterly reports.

Some property fund managers say they expected further upwardrevisions to 2006's consensus number before year-end due to strongnear-term momentum. Benchmark data published last week by theInvestment Property Databank showed the total return on UK realestate for the first seven months of the year was more than 11% ascompared to 19.1% in 2005. Office property in the London City andWest End districts showed the strongest projected returns and onaverage were seen generating annual rental growth of 5.5% and 6.7%over the next five years.