The commercial property sector will not recover until 2010, a leading indicator of market sentiment said today.

In its consensus forecast the Investment Property Forum (IPF) said that it had revised its view that there would be a partial recovery for the credit-crunch battered market in 2009.

Total returns falling

The consensus forecast also predicted that total returns for commercial property will fall by a further 5.7%.

Last quarter the forecast turned negative for the first time in eight years predicting returns falling by 2.6%.

‘The partial recovery suggested for 2009 in the last forecast as been replaced by continued falling capital value growth as yields are expected to move out further next year, in spite of sharp adjustments in 2008,’ the forecast says.

‘The improved total return figures reported for 2009 in the last survey have fallen back and, whilst still showing an improvement on 2008, are nonetheless weaker.

‘This is particularly the case for West End and City offices which are now showing below inflation and negative total returns respectively for 2009.

‘The 2010 forecasts show improving total returns on the back of stronger capital value growth and a limited return to positive rental value growth.’

Office and industrial gloom

The forecast said returns for the industrial and office sectors had been revised sharply downwards with retail warehousing expected to be the lowest performer in 2008.

Offices will be the worst performer in 2009, the IPF said, because of ‘substantial reductions in both rental and capital value growth figures.’