Offices continue to be the best performing property sector, having recorded returns of 3.3% in the second quarter of 2007, followed by the retail sector with 1.5%. All-property returns for Q2 remain in line with the previous quarter at 2.1% - only marginally below the 2.3% recorded in the first quarter of 2007, according to the latest Jones Lang LaSalle Property Index,

Offices continue to be the best performing property sector, having recorded returns of 3.3% in the second quarter of 2007, followed by the retail sector with 1.5%. All-property returns for Q2 remain in line with the previous quarter at 2.1% - only marginally below the 2.3% recorded in the first quarter of 2007, according to the latest Jones Lang LaSalle Property Index,

'The out-performance of offices was again driven by stronger rental value growth, which measured 1.6% over the quarter. This however, represented a significant drop from the 2.8% rental growth recorded for Q1 2007, reflecting greater caution in the current market where rising interest rates are a concern across all sectors,' JLL said.

The retail property sector recorded a total return of 1.5% in Q2 2007, marginally higher than the 1.3% recorded for the first quarter of this year. Industrial returns, however, fell from 2.1% to 1.2%.

JLL said the performance ties into the wider 'prime versus secondary' debate which is dominating the market at present and is reflected in the Jones Lang LaSalle Style Index, where growth properties recorded a total return of 2.7%, in line with the previous quarter. Secondary assets (value properties), however, continued to struggle and recorded a total return of 0.7%, slipping further from the 1.2% recorded in Q1. Capital values for secondary assets fell by 0.9%, with the industrial and office sectors particularly affected.

Commenting on the results, Andrew Renshaw, head of valuation advisory at Jones Lang LaSalle, said, 'Looking ahead, with the exception of certain secondary sectors, returns are expected to remain positive over the next few years. While there may be selective hardening in yields particularly at the prime end of the market, we expect a broad stabilisation of yields as investor demand tempers in light of the higher cost of debt.'