There were a number of factors supporting the upturn in performance:
* Initial yields on commercial property currently average 7.5% and are clearly attractive against current returns on cash and gilts.
* More positive sentiment towards property is now evident across IFAs, pension funds, actuaries and retail investors – this is translating into higher allocations to property and renewed positive cash inflows to institutionally managed funds, who are actively looking to buy.
* Additional investor demand is coming from a range of new fund launches.
* The leading quoted property companies have restructured and recapitalised and are now back in acquisition mode.
* The availability of good quality assets to buy remains limited, so strong demand is pushing up prices.
* The threat of large-scale forced selling from bank foreclosures has not materialised. Banks are taking a measured, orderly approach to property loans and taking pains to avoid crystallising losses. Distressed selling is likely to remain limited.
* In occupational markets, there are signs that the decline in rents is easing, with some markets looking close to rental stabilisation.
* The early impact of the credit crisis in checking development activity means the market is not burdened by excess supply from over-building, as seen in the early 1990s downturn. Very low levels of new construction in the past 18 months mean that a supply squeeze in new commercial space is a clear prospect by 2011.
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