Spanish commercial real estate returns are back to double digits, according to MSCI.

Returns last year reached 10.1%, up from 0.3% in 2013.

The result is the first time MSCI’s IPD Spain Annual Property Index has reached double figures since 2007’s figure of 12.4%.

The index measures un-geared total returns on directly held property.

Industrial was the best-performing sector, with a total return of 14.4%.

Retail, however, was the worst performer, although a total return of 9.7% was recorded in a sharp rise from the -1.5% in 2013. 

All sectors showed positive total returns thanks to their positive capital growth led by industrial, which grew at 6.7%, followed by office at 4.7% and retail close behind at 3.1%.

Elsa Galindo, MSCI senior associate, said that, after “many years of negative and sometimes cataclysmic return levels”, favourable trends in macroeconomic fundamentals have had a positive impact on confidence levels within the real estate sector.

“Capital values have increased, driven by the recovery in fundamentals and by the high liquidity existing in the market,” Galindo said. 

“Investors will hope the 2014 index results will mark an important part of the economic cycle as we see a gradual recovery both in the real estate market and in the Spanish economy as a whole.”

Spanish commercial property outperformed the domestic equity market, which returned 8.9%, but underperformed bonds, which delivered 24.5% last year.

The recovery in commercial property total returns was driven by a positive capital growth of 4.2%, compared with a 4.9% fall in 2013.

The rsie was the first time capital values have increased after six consecutive years of falls.

Income return remained stable at 5.6%.