RICS reveals commercial investment rise

Ramesh Sharma

April 8, 2006

The RICS annual commercial property forecast revealed commercial property returns are continuing to attract individual private investors, with total returns close to 20 per cent.

RICS has reported interest from investors in the Middle East has been the main catalyst for high commercial investment, with increasing oil revenues affording greater spending power.

It is thought UK Real Estate Investment Trusts (REITs) will further boost the commercial market, and RICS has suggested the impact of self-invested personal pensions (SIPPs) will be minimal on the housing market.

Commenting on the findings, Oliver Gilmartin, economist at RICS, said: “The doors to commercial property are opening up to a much wider audience and individuals are beginning to appreciate that this kind of investment can generate income while exposing them to comparatively reduced risk. We are seeing a rush into tax sheltered savings plans from those wishing to diversify their portfolios and spread their investments across different asset classes and varying geographical areas.

“However, while the next two years will continue to see healthy returns for investors in UK commercial property, some will be disappointed if they are expecting the kind of stellar performance experienced in the last three years.”

Andy Young, managing director at The Business Mortgage Company (TBMC), said the commercial sector had been strong over the past few months. He commented: “I would endorse RICS view that the market has grown. There is more interest in the commercial mortgage market from intermediaries and people are seeing investing in commercial properties as the next step up from investing in residential properties. The market has been stimulated by intermediaries and advisers looking to expand or add to their income streams, with new entrants into the market also having a big impact.”

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