Commercial property returns ‘are set to rise’

Posted 28/09/2009

Recovery in the commercial property market could see returns in the sector experience marked growth in 2010, according to an expert.

Macroeconomic research consultancy Capital Economics has expressed confidence that the downturn in capital values is now over, which will lead to an increase in property purchase activity.

As a result, the expert is forecasting a potential “mini-boom” in total returns from minus seven per cent to as much as 15 per cent, driven by a sudden increase in confidence among those re-entering the market.

However, Kelvin Davidson of Capital Economics cautioned that such a dramatic rise, should it occur, would be unlikely to hold out in the long-term and advised a more cautious level of expectation.

He told Mortgage Introducer magazine: “The commercial property downturn is now all but over, though there is little basis for expecting a return to the boom conditions of 2004-2006.”

This comes after Prudential director John Betteridge earlier this month stated at Money Marketing’s retail distribution review and economic update that commercial property sale prices are due to see an upturn in the coming months.