Offices in investment market focus

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.

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