Agent’s forecast backed by IRE’s latest analysis confirming rise in property’s performance
Mark Cooper
Property returns are set to get back to almost double figures this year, predicts Colliers CRE.
The agent’s Real Estate Investment Forecast predicts that the Investment Property Databank all-property total return for 2002 will be 9.4%, compared with 6.7% in 2001.
Colliers uses a model based on the IPD index to forecast annual returns.
The forecast is backed up by the latest Insignia Richard Ellis Monthly Index, which showed the 12-month, all-property total return for March up to 6.9%. In February, it was 6.4%. It is considerably more optimistic than other recent forecasts.
The Investment Property Forum’s latest investment intention survey showed investors forecasting a total return of 6.91% this year.
And the IPF’s most recent consensus survey of agents, fund managers and analysts expected total returns to hit 7.8% in 2002.
Colliers’ head of research, Dr Chris Pieroni, said: “We do not expect this year to be spectacular, but it will move closer to the recent pattern of double-digit returns that property produced for the five years from 1996-2000.”
He said property would be buoyed up again by its strong income return, as it was in 2001, but would not be hit by an adverse yield effect this year.
Colliers is predicting that yields in the retail and industrial sectors will move in – retail yields by 20 basis points to 7.1% and industrial by 10 basis points to 8.5%.
Office yields are forecast to stay static at 8.5%. The IRE Monthly Index reports that office yields, which rose in 2002, remained the same in the first quarter of this year.
Pieroni said the research added weight to the argument for a fundamental reweighting of property as an asset class.
“Historically, property has been used as a hedge against equities and gilts and as a counter-cyclical investment.
“However, property has now outperformed other asset classes over one, three and five years.”And, as the income return becomes a more significant aspect, property is being seen more as a bond-type rather than an equity-type investment.
“On this basis, the case for increased property investment is overwhelming.”
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All property total return |
|
Performance is recovering |
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Source: Colliers CRE/IPD |
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Total returns forecasts |
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|
IPD actual |
Colliers forecast |
|||
|
’99 |
’00 |
’01 |
’02 |
|
|
Retail |
14.1 |
6.6 |
5.5 |
9.5 |
|
Offices |
14.4 |
15.5 |
7.6 |
9.0 |
|
Industrial |
17.7 |
13.8 |
8.2 |
10.2 |
|
All property |
14.7 |
10.5 |
6.7 |
9.4 |
|
Source: Colliers CRE/IPD |
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