Commercial property is likely to deliver double-digit returns
for investors in 2014, say a number of analysts and fund
managers.

The recession has created a pent-up demand for office space
which could see surges in activity throughout this year; strong
interest in British commercial property from overseas investors
will also have a positive impact.

A decade ago, commercial property investments made up a
significant proportion of pension portfolios, with retail, office
and industrial assets viewed as being steady sources of
returns.

However, the 2007 financial crisis saw commercial property
investments falling by much as half, as fears grew about Britain's
economy and the level of debt associated with property
investments.

However, the industry seems to have finally turned a corner,
with IPD's Commercial Property Index showing an 8.9 per cent total
return over the past year. Many fund managers have therefore been
recommending commercial property to investors, even suggesting
potential returns of 10 per cent or more in 2014.

George Shaw, manager of the Ignis UK Property fund, says that
supply is not currently keeping up with demand, which could lead to
a surge in prices:

"There is competition for a limited number of quality assets,"
he said, "as an increasing number of investors seek exposure to
these assets. Average property capital values remain about 30pc
below the previous peak recorded in 2007.

"There is hardly any construction overhang from the crisis,
which has created limited choice," she explains.

"This is why I think we will see a strong bounce back in tenant
activity. With office spaces drying up in London and demand for
space high, I am optimistic that rental growth will only go one way
- up."

While London will continue to be a key player in the recovery,
regional markets like Liverpool and Manchester will begin to bear
fruit too, says Garry Ferguson, of Scottish Widows Property
Trust:

"Property in the North West is
offering yields of about 6pc, which is great value when you
consider that foreign investors are also looking to buy outside
London.

"There has been a lot of quality property development in
Liverpool and Manchester
in recent years, so outside London they are two of the best areas,"
he said.

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