UK
property will deliver a total return of 9% pa
between 2015 and 2019, despite a slow first quarter this year,
according to Aviva Investors.
Richard Levis, global real
estate analyst at Aviva, said: “Looking ahead, real estate is likely to remain
attractively priced relative to other asset classes, especially government
bonds, over the next 12-18 months. And given the weight of current demand for
UK real estate, further yield-driven capital growth looks probable in the near
term with good secondary and regional assets likely to perform especially
well.”
Capital growth slowed in
the first quarter of 2015, with the IPD quarterly index recording total returns
at 2.9%, down on the 4.1% in the fourth quarter of last year.
Levis also said that
secondary assets are likely to outperform over the period. “We have been
recommending such assets for some time as they can offer attractive yields and
the potential to capture the ongoing improvement in the UK’s occupier markets,
particularly in the office and industrial sectors.”
The office sector led the
way in terms of returns in the first quarter, and retail remained the weakest.
Availability in central
London fell to its lowest level since 2002, which drove office rents up in the
City and the West End.
Levis said: “In the retail
sector, London continues to experience strong occupier demand, driven by the
capital’s strong economy, record tourist numbers and high demand from
international retailers.”