Real estate investors operating in the UK grew slightly more cautious during March, with the budget in particular focussing minds on what may lie ahead and the uncertainty of an election period, according to Cushman & Wakefield's latest UK business briefing.

Real estate investors operating in the UK grew slightly more cautious during March, with the budget in particular focussing minds on what may lie ahead and the uncertainty of an election period, according to Cushman & Wakefield's latest UK business briefing.

C&W said deficit reduction and taxation plans are likely to remain an area of concern for some time. But recent more positive news on economic growth and a fall in inflation may help reassure those fearing a substantial early increase in inflationary pressures.

For prime property the sentiment remains optimistic and yields have edged down still further, falling five basis points in March to an average of 5.85%, their lowest since May 2008. Yields have now fallen 153 basis points since the market low point one year ago, but are still 142 basis points up since the market peaked in 2007.

The research suggests the occupational markets are still best characterised as weak to stable although sentiment is steadily improving.

Yields in 17 of the 25 sectors monitored are now judged to be steady providing the most stable picture since August last year.

Furthermore, evidence in parts of the secondary market points to yields remaining high or even increasing in some sectors as investors take a reality check and face up to the very different supply and demand balances facing prime and secondary markets.

Increasing competition to lend is pressurising margins meanwhile and leading some lenders to consider riskier propositions. However even with lending costs down, many borrowers are struggling to compete with equity buyers given the debt structuring and amortization requirements being made. It is certainly apparent that many vendors still prefer to deal with equity rather than debt buyers to ensure a speedy and certain trade, C&W said.