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Strong returns for global commercial real estate markets predicted

Standard Life Investments said it believed that in an environment of low interest rates and a moderate economic recovery, the relatively secure yield from real estate remained attractive.

David Paine, Head of Real Estate Investment, said: "Recovery is materialising in most global real estate markets, leading to tenant demand improving as occupier confidence and business investment increases. Vacancy rates are falling as a result and strong rental growth is being recorded in some of the highly cyclical supply constrained office markets such as Hong Kong, Central London and Paris.

"Globally, given that development financing disappeared rapidly as a result of the credit market problems, the supply of good quality new space is at low levels in most markets, and we expect this to continue over the medium term leading to an improvement in yields.

"As investors have become more concerned about inflationary pressures they are increasingly looking to real estate to provide a hedge; hence allocations to the asset class are increasing and we expect this trend to continue."

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