Commercial property is set for capital and rental growth throughout 2014, according to research by Legal & General.
In a Fundamentals briefing at the firm’s London office this week, Rob Martin, director of research at Legal & General Property, said the recovery in rents for high-quality buildings would continue following a rise of 2.7% last year – the strongest performance since 2007.
Constrained supply of new property will fuel capital growth, he said.
“We expect further improvement in the next 2-3 years,” Martin said, adding that Legal & General Investment Management was “increasingly confident in the strength of the economic recovery”.
LGIM forecasts UK GDP growth of 3% for 2014, while L&G Property foresees average growth in property values of between 1% and 2% over the next five years.
“Prices may experience a substantial uptick in 2014,” Martin said.
He added that the combination of capital and rental growth should result in returns of 7-8% over the next five years.
With the London market detached from the rest of the UK, there is now the “greatest scope for a broad, cyclical recovery outside of the capital”.