Retail property could show returns in excess of 20 per cent in 2006, according to the latest research from property consultants Donaldsons.
The firm's bullish forecast contrasts starkly with the IPF Forecasts Survey, which puts forward a much more conservative prediction of likely commercial property returns of just 11.2 per cent, itself up from the 8.6 per cent forecast at the start of the year.
But Donaldsons says it will not be the first time that the analysts have been proven wrong.
In 2005, the IPF Forecasts Survey predicted total property returns of 10.6 per cent, but in the event, retail prop-erty generated 18.9 per cent, while commercial property as a whole saw a return of 19.1 per cent.
The picture was similar for the preceding year, when the IPF consensus prediction was 9.1per cent, while the retail sector actually generated a total return of 20.5 per cent in 2004, with a 18.3 per cent total return for commercial property.
Donaldsons' prediction of healthy returns for 2006 in excess of 20 per cent is based upon IPD source data, combined with insight gained from everyday experience of market demand at grass roots level.
David Fox, partner and head of retail asset management at Donaldsons in Birmingham, said: "This is a sector that is still performing well and our expectations for this year, whilst higher than some predictions, are based on our enthusiastic view of the retail market."
Donaldsons says its view of the market is substantiated by the weight of money that continues to move into retail property.
The firm's latest research figures reveal that since summer 2005, nearly 25 per cent more net investment has gone into the retail sector than offices - most analysts top rated sector for performance.
Examining historical figures to the end of the first quarter of 2006, the research reveals that the underlying demand for retail property remained strong, achieving total annual returns of 23.3 per cent to the end of March 2006.
These were driven in part by prime retail warehousing, which showed a steep capital value increase of 21.7 per cent and an income return of 4.5 per cent.
Mid and low-yield shopping centres also saw good growth, with total annual returns of 20 per cent to March 2006 and quarter-by-quarter improvements.
In a sub-sector traditionally favoured by investors, Donaldsons is confident that the remaining three quarters of 2006 will show similar strength and anticipates additional growth in shopping centres. This is due to their i ncome return/covenant spread advantages and natural 'REITability'.
Throughout the last 12 months, returns in the shopping centre and high street shop sub-sectors also remained good.
Both categories saw annual income returns of 5.3 per cent, with secondary shop rental values showing continued strength.
Rental growth rates of 3.1 per cent and 2.6 per cent respectively contributed to total returns of 17.3 per cent in high street shops and 19 per cent for shopping centres.
Mr Fox added: "This is good news for Birmingham, which has improved its retail offer tremendously in recent years and has seen substantial investment.
"The city continues to provide attractive opportunities for national and international retailers as well as investors.
"Birmingham is now firmly established as a destination location for shoppers of all categories and we are seeing encouraging sales figures from retailers, which allows us to be positive about future growth."