Unlisted real estate funds are feeling the benefit of the UK’s recovery, according to IPD.

Unlisted funds returned 2.9% for the three months to March 2014. With returns in the final quarter of 2013 at 4,1%, the two most recent quarters recorded the highest return levels since June 2010, IPD said.

Phil Tily, IPD executive director and head of UK and Ireland, said with forecasts for the UK economy improving from month to month, rental growth is now spreading to property across the country.

“[This is] a trend which is reinforcing performance for direct and unlisted funds alike,” Tily said.

According to the AREF/IPD UK Quarterly Property Funds Index, of the 48 funds measured – worth a combined £33.2bn – four delivered quarterly returns of at least 6% to March 2014, while the majority saw returns exceeding 3%.

Returns for bonds and equities for the same three-month period were 2.5% and -1.5% respectively (JP Morgan 7-10 year/MSCI UK). Returns for direct commercial property, as measured by the IPD UK Monthly Property Index, stood at 3.9%.

Of three fund types measured by IPD, balanced property funds delivered the strongest performance, 3.3%, for the second quarter in succession, against the 2.5% of specialist funds and 2.2% of long income funds.

Both central London office and industrial portfolios emerged strongly in the first quarter of this year. Both groups contained two funds returning at least 6% over the quarter. Amongst specialist funds targeting the retail sector, those focused on retail warehouses nearly all outperformed those in the shopping centre space, none of which returned more than 1.4% over the quarter.