UK commercial property returned 10.5% in 2013, its highest level since 2010, according to the IPD’s quarterly property index.

A recovery in regional property values helped to push total return to 4.4% in the fourth quarter. Property performance outside the capital city has been muted since the recovery, but 2013 saw the return of growth in the regions, said Phil Tily, IPD executive director and head of UK and Ireland.

Commercial real estate values have risen by 26% in central London since 2010, but have fallen by 4% in the rest of the UK. However, 2013 saw the recovery begin to even out, as capital values outside London rose by 2.2% during Q4 – not far off the 2.9% capital value growth for the whole country including London during the period.

Tily said: “The growing divide between London and the rest of the UK has been one of the defining features of the recent property cycle, with the flood of investors chasing safe haven assets given concerns about stability and security of income.”

“The improved economic outlook is having a more widespread impact on the latest performance results. Though London returns remained highest overall in 2013, the heavy discounting of regional assets and their high-income returns are providing the potential for value-add plays, feeding through into stronger regional returns over recent months.”