What are the prospects for UK commercial property?

Guy Morrell, head of multi-manager at HSBC Global Asset Management (UK), and manager of HSBC Open Global Property fund, examines how recent volatility has affected the commercial property sector.

Relative to its historic average, UK commercial property delivered exceptionally strong returns in 2010. During the 12 months to December 2010, nominal total returns were 14.5% according to the IPD UK Monthly Index, which measures the performance of unlisted (direct) property in the UK. This represents a real (inflation-adjusted) return of more than 9%, which is significantly higher than the long-run average real return of that Index of 5.1% per annum. But UK commercial property has experienced significant volatility over recent years. From the June 2007 peak to the trough in July 200...