According to the Carter Jonas, the UK property consultancy firm, total returns for Commercial Property will fall to 8.8 percent in 2016.This contrasts with 2015 which has seen total returns of 13.4%, with offices and industrial outperforming the wider market.
The forecasts reflect a relatively positive economic outlook for the UK for the next twelve months, although the prospect of higher interest rates and a degree of uncertainty surrounding the UK’s position in the EU may dampen investor sentiment.
Geremy Gidman, Head of Investment & Asset Management, Carter Jonas, said: “The party of yield compression is largely over – yields are back to their 2007/2008 peak in most areas of the market, and we are unlikely to see yields hardening much further in 2016 due to wider economic conditions. The fact that rental growth is coming through more widely should help to sustain the investment market, although it is difficult to see the volume of transactions in 2016 matching the record level we have witnessed this year.”
Other Key Highlights;
-Central London offices to outperform, followed by Industrial
-Retail forecast to lag behind, but out-of-town retail parks expected to perform well
-Total returns for Rural property are expected to reach 9% on the back of steady capital growth -Residential will see total returns of 7-8%, with higher-yielding markets outside London generally performing better
Source: Carter Jonas