Commercial Property Is Investment of the Year

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UK commercial property is one of the best performing investments – recording a massive 20% growth in the past 12 months.

Commercial property showed the best return on nine different assets over the year ending October 2014, according to Lloyds Bank Private Banking money managers.

On average, the other eight asset classes showed a 4% return across the year – compared with 4.6% for the same period last year.

In comparison, global equities returned 12.8% in the year – the second highest level ever.

However, equities have been patchy, with an uneven economic recovery around the world which has held back prices, says the bank.

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Metals tarnished

Although the US and UK have performed well, a Eurozone slump and erratic growth in China have pulled share values down.

Although UK commercial property and global equities showed the largest returns, UK residential property was the only other asset to show a double-digit return at 11.3%.

UK bonds (6.7%) and international bonds (5.5%) were both up, but returns fell for precious metals (-17.8%) and commodities (-4.9%).

Precious metals have failed to shine for two years. Gold’s 12-year run of profits ended in November 2013, when the price slumped by 27%. In the past 12 months, demand has dropped 11.9% and the price has suffered against a strengthening US dollar.

Silver has also seen a 10.6% fall.

Coffee in a stir

In commodities, coffee caused a stir as the top performed with a massive 76% price increase, while wheat was the worst performer, dropping 35%. Oil, corn and soya have all showed significant price falls as well.

Besides coffee, top performers were zinc (up 20.7%), aluminium (up 13.3%), and cocoa (up 9.5%).

Ashish Misra, head of investment policy at the bank, said: “UK commercial property has showed the strongest returns as an investment in the past year.

“We have seen investor confidence increase as the economy has showed signs of improvement.

“The market has recovered for investors and occupiers with rising demand and a drop in supply, forcing up rents and capital values.

“London has led the way, but now we can see this rippling out to other regions as well, which bodes well for the sector.”

Commercial property has reversed an investment trend in 2014. The best performing asset class in 2012 and 2013 was global equities – with 28% and 11% increases. Before that, precious metals led the way for investors in six of the eight years going back to 2004.

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