Uncertainty wrought by the ongoing eurocrisis and poor UK economic indicators have further weakened the outlook for UK commercial property.
According to the May IPF UK Consensus Forecast, projected return expectations have dropped from 1.6% to 1.4% in 2012, which is anticipated to be the bottom of the current cycle.
The survey, which canvasses the opinion of around 30 property advisers and fund managers on a quarterly basis, found that the downgrade has been driven by a sustained expectation of a 4.6% fall in capital values and an implied fall in income return to 6% this year.
Rental value growth has come under more pressure with the forecast worsening by 0.1% to now lie at 0.9%.
Shopping centres saw the most noticeable change in sentiment for 2012, with forecast returns falling to -0.5% compared with the 0.3% Q1 projections. It is the only sector that is forecast to deliver a negative total return.
The survey anticipates a stronger year for offices, with a total return of 3.1% forecast for the year, shored up by strong performance in the City and West End, which should deliver 3.7% and 5% respectively.
