UK commercial property is set for a total annual return of 8.5 per cent for the next five years, says SWIP.

Research by the firm shows good long-term prospects for the sector, with anticipated returns to outperform equities and bonds over this period.

“Over the first half of this year, we have seen an improving trend in the figures coming through for property fundamentals as rents become less negative and expectations for capital value growth become stronger,” commented Dr Ed Trevillion, head of property research at SWIP.

“That said, returns in 2011 are forecast to remain weak for the UK commercial property market as the UK economy remains fragile and testing times continue in Europe. Against this economic backdrop, investors remain wary and activity has moderated over the first quarter this year.”

SWIP added that the office sector will deliver total returns of 9.4 per cent per annum over the five year forecast period, compared to 8.6 per cent from the industrial sector and 8.0 per cent from the retail markets.

“Although concerns remain over the shorter term for investors in the UK commercial property market, property remains attractive relative to other asset classes. Property investment is a long-term game and its diversification attributes and ability to offer investors attractive yields remain encouraging reasons for any investor to consider the asset class as part of a balanced portfolio.”

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