UK commercial property 'set for big year'

The returns likely to be enjoyed by owners of commercial property look set to be double what was originally predicted by industry analysts.

Aviva Investors has upped its forecast returns for the sector from four per cent to eight per cent, as market conditions combine to spell out a more promising future. Increased risk appetite and cheap valuations were revealed by What Investment to be the major drivers of this trend.

Interest from both the domestic market and overseas investors has been given a fresh boost on the back of the loose monetary policies that have been displayed by major banks throughout Europe. A shaky picture on the continent seems to have inspired a new wave of positivity in the UK scene - and that is good news for those with commercial property to their name.

Philip Nell, manager of the Aviva Investors Property Trust, explained: "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."

He went on to state: "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."

Mr Nell predicted that the boost enjoyed by commercial property agents over the coming months would not be confined to central London. Indeed, he suggested many "good secondary assets" in other locations would record positive results in 2013.

While investors must be sure to be aware of the risks of the current market, there are still opportunities to be taken. A strategy that is centred on specific assets was named as the ideal approach for the year ahead.

Among the major threats that could, but are not expected, to halt the booming commercial property sector are declining occupier demand rates and the widespread squeeze on the retail industry that is being felt across the country.