The Investment Property Forum’s (IPF) 2018 UK commercial real estate consensus forecast has been upgraded as forecaster sentiment for the current year picked up.

In November last year, IPE Real Assets reported that despite a better-than-expected performance by the UK commercial real estate in 2017, IPF’s research has shown that most major property consultants and fund manager researchers do not believe the market will remain strong beyond 2018.

In its latest report, IPF said the “outlook for 2018 has improved over the three months since the last survey” was conducted, with average rental and capital value growth rates increasing in virtually all sectors. 

IPF’s latest UK Consensus Forecasts report surveyed 23 property consultants and fund and investment management houses.

It showed that the rental value growth average forecast has risen to 0.8% from 0.4% three months ago.

Also, the average capital value growth rate has now increased to -0.2% from -0.7% in November with industrial growth now expected to be 4.0% from 2.7% in the last survey.

IPF said the 2018 average total return prediction has improved to 4.6% for the year, from 4.0% last quarter, reflecting an implied income return of 4.9% from 4.8% previously.

Research firm Capital Economics said the IPF consensus has pushed up its forecast for all-property total returns this year, reflecting a less pessimistic outlook for rental growth, 

In a note by chief property economic Ed Stansfield, Capital Economics said the main driver of that revision was a more positive outlook for rental values.

”That suggests that the economy’s improved momentum at the end of last year has made analysts less nervous about occupier fundamentals.”

But in 2019 and 2020 a gradual upward drift in yields is still expected to drag down capital values modestly, the research group said. 

“The bigger picture, however, is that in common with our own views, most forecasters expect the commercial market upswing will end with a soft landing,” it said. 

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