UK commercial property has delivered the strongest investment returns of a range of key asset classes in the past year, according to research by Lloyds Bank.
A total return of 20.1%, as measured by the IPD index in the year to October, means that UK commercial property has significantly outperformed assets including UK and global equities, bonds, UK residential property, and precious metals.
Global equities, up by 12.8%, and UK residential property, with capital and rental returns totalling 11.3%, were the next-best performing assets over the year, according to Lloyds’ Private Banking Assetwatch report.
The outperformance by commercial property comes despite global equities rising to a record high in October.
Ashish Misra, head of investment policy at Lloyds Bank Private Banking, said: “Returns on UK commercial property have been boosted as investor confidence has improved on the back of a positive economic outlook.
“Recovery in both the occupier and investment markets has been in full swing for much of the past two years, raising demand and, with supply slow to respond, driving up rental growth and capital values.
“While demand in London has driven returns for much of the period, recovery in the regions appears to be coming through more strongly now as well.”
Over the past decade, however, UK commercial property’s total return of 77.2% has been lower than that of UK and global equities, and of precious metals, says the report.
UK shares, with a total return of 116.1%, have been the best-performing asset over 10 years.
Lloyds Bank Private Banking Assetwatch tracks the performance of nine asset classes: UK shares, global equities, UK bonds, international bonds, cash, UK commercial property, UK residential property, commodities and precious metals.
