Hope for business property

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THE commercial property market is set for recovery, with investors planning to spend more this year, according to a survey of property companies and institutional investors.

Only 20 per cent of respondents to the poll, carried out by the Corporate Intelligence Group, expected to be net disinvestors this year, against 40 per cent who bought less than they sold in the second half of last year.

The survey, which questioned 90 property companies and institutional investors with total assets of pounds 24.4bn, revealed that most investors who anticipate buying certain types of property this year expected to buy more of it than they did in 1992.

It also emerged that investors were more willing to buy secondary space compared with last year's survey, which showed a bias towards prime space.

The CIG said this indicated that investors now think the bottom of the market has been reached or will soon be reached.

The majority of investors expected investment activity to pick up in the second half but an increase in capital values is not anticipated until 1994.

Warehouses are set to be the most sought-after space this year, but out-of-town space emerged as the most unpopular type.

The survey showed that investors believe that traditional 25- year leases would remain popular, despite pressure for shorter leases and rent reviews that can see rents fall as well as rise.

Respondents argued that changes in market conditions by 1995 would shift the balance of power away from tenants and back towards landlords.

Institutional investors warned that widespread downward rent reviews would destroy the rationale behind property investment.