Confidence amongst investors remains strong with nearly 55% of respondents to Jones Lang LaSalle's UK Real Estate Investor Confidence Survey more positive about the next twelve months. Nearly 70% of the survey participants expect total returns for this year to be higher than the 3.4% recorded in 2009. The employment outlook is also encouraging with around 25% of the respondents expected to increase staff, a similar level to the previous quarter.
Commenting on the survey, Julian Stocks, Managing Director Capital Markets at Jones Lang LaSalle, said: "Strong investor demand continues and prime yields have now fallen 106 basis points overall since their high in June 2009. In the central London office market overseas private investors have been joined by the UK retail funds in pursuit of limited stock. Prime yields in both the West End and City have now fallen below their long terms averages at 4.75% and 5.75% respectively, and are currently trending stronger."
Julian continued: "Given the weak economic outlook there are many areas and sectors where rental growth is a long way off. Investors need to be cautious and be aware of the risks that remain in the occupational markets. There is more stock coming to the market and I expect the balance between buyers and sellers to shift later in the year."
Paul Guest, Head of Jones Lang LaSalle's EMEA Research team, added: "We are projecting double digit total returns of approximately 12% for this year, fuelled by strong income growth and compounded by rising values on the back of significant pent-up demand from institutions, REITs, overseas investors and retail funds."