Colliers CRE is tipping the retail sector to be the top-performing property sector over the next two years. In its authoritative Midsummer Retail Report the firm forecasts that total returns from all retail--high street shops, shopping centres and out-of-town--will double this year to 11.1%, comfortably outperforming both offices and industrials.
And it expects similar performance in 2003. This performance will be driven partly by continued rental growth in all retail markets, reflecting the buoyant UK economy and strong consumer spending, but also by a yield shift as retail property returns to favour with institutional investors.
Andre James, Head of Investment at Colliers CRE said that yields on prime high street shops could fall from todayÂ's 5.75% to 5.25% over the next 12 months. Although there is very little trading activity in prime shopping centres, James said yields for the best schemes could fall below 5%. And out of town prime fashion parks are likely to see yields hardening from 5.75% to 5.25%, he said.
'There is now much more institutional money available,' said James, 'driven by poor performance elsewhere and an expectation of rental growth.' But he warned that if the FTSE-100 index of the UKÂ's top shares contines to fall much further below the 5000 mark then institutions could perceive stocks as undervalued, and shift asset allocations back away from property.