Frost Meadowcroft

Offices in investment market focus

January 07

Investment demand in the commercial property market remained
solid during the final quarter of 2006. Total returns from commercial
property investment have slowed a touch however into December
as capital values have started to stabilise. As such commercial
property returned 18% in
the year to December down from 22% six months earlier.

Investors have focused on the office market over the last 12
months with 45% of new purchases targeting the sector, in particular
Central London offices. Yields continue to converge with the all
property yield for December at 4.57%. An upward shift in interest
rate expectations has reduced the yield attraction of commercial
property and will continue to temper demand during 2007.

Source: RICS Economic Brief January 07

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