Looking back at the annual total returns for commercial property as measured by IPD, we see that the 10.4% recorded in 2011 is somewhat disappointing and speaks to the double-dip notion that economic commentators alluded to back in 2009/10. As such this return is then actually not surprising. Perhaps more importantly are the drivers of returns as reflected in the first graph below; in particular the flat net income growth and more specifically the disparity between the growth in income vs. costs. This is also reflected further below showing how Net Income is a function of Base Rent + Fixed Recoveries + Variable Recoveries – Operating Costs and whereby the latter two aspects have grown in proportion.

In a select poll run by IPD concerning the outlook for 2012, 74% of respondents anticipate an improvement on 2011’s results and 24% anticipate a deterioration.

The eProp Commercial Property Confidence Index (CPCI) conducted over February/March 2011 polls industry expectations regarding business conditions for the next six months; the following is noted:

The eProp Commercial Property Confidence Index reached an aggregate level of 52 in March 2012. This is the first time since March 2008 that the index has broken the neutral 50 mark and speaks to a slight improvement regarding the outlook for the sector overall (see graph below). We will look at the eProp CPCI in further detail in our next edition.