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Property Returns Slowing, Says LSH

LONDON-Returns on property investment are declining as the economy slows, but property is still out-performing equities and government bonds, according to new analysis from Lambert Smith Hampton.

By Graham Parker | Updated on August 23, 2001

LONDON-The rate of rental growth in all commercial property sectors is slowing, and at the same time yields are increasing, according to new analysis from Lambert Smith Hampton. This combination is hitting the overall returns obtained by property investors, but property is still managing to outperform equities and government bonds.

All property rental growth slowed to an annualised rate of 4.3% in the year to July, according to the IPD monthly index, and the slowdown has affected all three sectors. The office sector is still leading, although annual growth is down 7.3%, reflecting lower occupier demand particularly from the telecommunications and IT sectors. However, Lambert Smith Hampton expects the office sector to remain the top-performing sector. ‘whilst rental growth over the next two years is expected to be lower than in the recent past, it is still expected to be higher than either retail or industrial properties,’ says Arezou Said, research analyst at LSH. ‘We expect rental growth to average around 4% per annum.’

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