Reflecting this consistent strength, institutional investors have now returned in strength to the property market. IRE says this new competition is driving down yields, particularly for retail property.

IRE is now forecasting that total returns from property will be over 9.0% this year. Retail will be the best performing sector with total returns in double figures, while offices will be held back by weaker rents in London and the South East. But the agent is predicting that returns will be lower in 2003Head of Research Peter Damesick said: "Yields next year may suffer from higher interest rates. Also, we expect household spending growth to ease over the next couple of years and this is likely to restrain rental growth in the retail sector."And looking further ahead IRE expects property to continue to thrive on a lack of speculative over-supply and relative stability in a low inflation environment, with forecast annualised returns around 9.0% over the three years 2002-4.