The property market is on the up as the UK continues to recover
from recession. Investors have been cautious in recent years
following heavy recessionary losses, but that seems set to
change.

The economy expanded 0.8 per cent in the third quarter of this
year, with manufacturing, construction and service industries
likely to accelerate further for the rest of 2013.

Recent IPD data shows the UK's latest commercial property
returns being 2.8 per cent, with capital values rising by 1.3 per
cent; rents also increased by 0.1 per cent over the three-month
period. Investors are now looking beyond London for safe
returns:

"Until recently, demand for property in regional UK markets has
been weak, though with a strengthening UK economy this is changing
fast. We recently bought a large industrial estate in the Midlands off a
yield of 10 per cent. Its price today would without doubt be
higher," says
Schroder UK Property fund manager Ian Mason.

"In 2008, property valuations were falling across the board
irrespective of the quality of the real estate. There was virtually
no liquidity and any deals that were taking place traded at
increasingly distressed prices as the year went on.

"After a period of dull returns for the past two or three years,
prospective returns from UK commercial property are good. We
forecast total returns will be 7 to 8 per cent per annum over the
next five years, driven mainly by an income return of 6 to 6.5 per
cent," he added.

IPD's data has shown that commercial property values outside of
London increased by 0.8 per cent in the third quarter, after a
suffering a fall of 7.3 per cent over the previous two years. Total
returns outside of London are now at their highest in three years,
at 2.4 per cent.

IPD head of UK and Ireland Phil Tily said: "The divide between
London and the rest of the UK has reached unprecedented levels over
the last six years, but with economic improvement spreading out of
London, investors in these regions are starting to benefit from
improved rates of return."

However, Shaw says we won't see a return to the post-recession
bubble: "We are not in the same position as mid-2007. The yield
compression that drove UK property valuations to 'bubble' levels
was a trend that accumulated over years with the simultaneous
squeezing of relative pricing within the asset class.

"The money now targeting the asset class is looking at investing
over the medium or longer terms. This could be described as an
absence of traders or speculators, usually a prerequisite for major
pricing swings away from fundamentals."

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