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‘Too low’ property market consensus

"Throughout 2011 we have consistently remained ahead of consensus expectations for total returns in 2011. Ignis has taken the view that market average capital growth would be flattered by strong investor demand for prime assets, particularly in Central London," he said.

Shaw also believes that total returns will be driven by income returns in the short to medium term, with capital appreciation, at best, matching inflation.

He said he expected values for secondary assets to remain under downward pressure but also that the pricing of some "upper secondary" locations were now close to their nadir, as investors with money to spend had no choice but to "inch up the risk curve".

"Secondary assets in the majority of the market remain vulnerable to capital decline, hence our bias towards prime properties and our significant exposure to Central London particularly, where performance prospects are strongest," he said.

Shaw believes that Central London offices will be the top performing sector over the next three years, although he warns that by 2013 the margin of outperformance will be significantly reduced.

In addition, he predicts rental growth in the retail sector, with the exception of London/South East and the top 20 or so locations, will remain at a level well below those delivered by the High St sector over the past two decades.

"Going forward we will be monitoring signs of commercial property becoming mispriced relative to other asset classes and capitalising on the opportunities that this is likely to present," he said.

"This could involve picking up assets from investors withdrawing from / reducing, exposure to property; or through situations where we are able to add value through proactive asset management."

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