Commercial property offers yields of 7.5%

22 June 2012

Investors can benefit from yields of 7.5% and above from UK commercial property, thanks to low capital values and rising rents.

Anne Breen, head of real estate research and strategy at Standard Life Investments, says investors in UK commercial property can expect yields of nearly 8% over the next three years.

She also cites "increasingly strained" supply, and a low level of construction activity in the property sector as reasons for the stable yield.

Breen adds that offices in core central business districts such as the City and the West End of London, and large regional shopping centres are the most attractive commercial property investment at the moment. At the other end of the spectrum, small high-street shops and smaller shopping centres are the worst.

Muted outlook

However, she warns that there is a "muted outlook for capital values", and investors in commercial property should expect the majority of returns to come from income.

Meanwhile Standard Life Investments, which invests in commercial property globally, expects returns in the US and Asia to hit 8.5% over the next three years.

Over one year, Aviva Investors Property Trust is the best performing fund, returning 14%, while First State Global Property Securities is the top performer over three years, soaring 78%.

In the investment trust world, MedicX is the top performer over one year, adding 9% in share price terms. Over three years, Aseana Properties comes out on top, returning 121%.

This article was written by our sister website Money Observer

Add new comment