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Credit Suisse Asset Management predicts continued strong returns from UK commercial property

At the start of the second quarter of 2005, Credit Suisse Asset Management (CSAM) maintains its view that the UK commercial property market will deliver total returns of 8.5 - 9% in 2005.

In contrast to last year, however, far less of the return is likely to come from capital growth as yields start to pay increased attention to a continuing weak occupational market. As a result of limited rental growth, CSAM also anticipates convergence of the three sectors - retail, industrial and the office market - with returns of 8.5 to 9% expected from each.

Commenting, Glenn Newson, Head of UK Property at CSAM, said:
"The income component of total return across the broad market has suffered due to a weaker occupational market as a result of some tenants getting into financial difficulties. In these conditions, the key to generating high returns is research driven stock selection and strong management, which is where we believe our interventionist approach will pay dividends.

"Commercial property continues to be a popular asset class and as a result, we are seeing considerable weight of money coming into the market with very little additional stock becoming available, all of which is continuing to drive up prices. In such a competitive market, stock selection becomes even more important.

"Although the market has performed incredibly strongly, we believe outflows from the asset class are unlikely on the basis of anticipated strong returns. There are a number of reasons why we believe that property remains attractive for both institutional and high net worth investors - namely its continuing solid performance and diversification benefits due to a low correlation to equities and bonds."