Investors from Aviva have doubled their estimates for the commercial property sector in 2013.
By suggesting that there has been an increase in demand due to cheap valuations, the return forecast has been increased from four per cent to eight per cent.
According to Aviva, loose policies from within European banks and lower prices of commercial property in the UK has led to a dramatic increase in demand within the sector. This has led to investors believing that investment returns could be as high as ten per cent later this year.
Talking to What Investment, Philip Nell, manager of the Aviva Investors Property Trust, said: “Combined with the continuing hunt for yield, the income generating credentials of real estate, and a real possibility of capital growth, this should result in a turnaround in sentiment towards the asset class this year.”
Generally, investors are feeling more relaxed about investing in the sector, especially outside of the capital city. Mr Nell added: “Sectors such as industrials and offices outside central London are likely to drive returns for the next couple of years, even on a risk-adjusted basis.”
However, it is not all good news as analysts have suggested that investors should not aim to broaden their investment strategies. With the retail sector still fluctuating, it is difficult to estimate demand and so therefore investments must still be managed carefully.
It is generally recommended that investors should focus on specific assets instead of a top-down strategy based on a single sector.
Investors hope that the upwards trends seen already in the first two months of the year will continue for the rest of 2013, and that this year may in fact be a “turning point” for the commercial property sector.