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”.

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