Aviva predicts 8.9% returns for UK commercial property

Aviva Investors has raised its performance predictions for the UK commercial real estate market to an annual average total return of 8.9% from 2014 to 2018.

The firm forecast returns of 6.5% earlier this year, but has raised its prediction as the asset class strengthens.

´Real estate still remains attractively priced relative to other income-producing assets and we expect capital growth to remain strong in the near term,’ said real estate global research manager Chris Urwin.

´Under our base case economic scenario the prospects for returns in 2015 also look strong.´

Aviva sees some remaining scope in secondary markets, Urwin said.

´Secondary and regional offices strategies remain appealing, but market sentiment has already been strong and transaction pricing is frequently well ahead of valuations. This means time may be running out for investors to gain from the cyclical opportunity.´