Lloyds: Commercial property delivers strongest returns

Investment returns on commercial property were the highest among nine key asset classes, growing by 20.1 per cent in the year to October, according to Lloyds Bank Private Banking.

Lloyds said investment returns on UK commercial property have been boosted by falling yields as investor confidence improves, while the continuing economic recovery has lifted rental growth.

Recent data published by Cofunds supports this, with property retaining its position as the bestselling sector in October with the highest percentage of net sales.

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Lloyds’ data also revealed global equities achieved annual returns of 12.8 per cent, followed by UK residential property which grew at 11.3 per cent.

Lloyds said that this was driven by average housing values rising by 7.6 per cent and returns on private rents growing by 3 per cent between October 2013 and October 2014.

UK and international bonds returned 6.7 per cent and 5.5 per cent respectively, while UK shares delivered 1 per cent and cash only 0.5 per cent.

At the other end of the spectrum, investor returns in commodities fell to -4.9 per cent while returns in precious metals fell to -17.8 per cent.

Ashish Misra, head of investment policy at Lloyds Bank Private Banking, said “In the year to October, UK commercial property has been the best performing asset class.

“Investment returns on UK commercial property have been boosted as investor confidence has improved on the back of a positive economic outlook.

“Recovery in both the occupier and investments markets has been in full swing for much of the past two years raising demand, and with supply slow to respond, driving up rental growth and capital values.

“Whilst demand in London has driven returns for much of the period, recovery in the regions appears to be coming through more strongly now as well.”