* Improvement driven by demand for retail warehouses
* Still lags broader UK property market
By Brenda Goh
LONDON, June 29 (Reuters) - British commercial regeneration property posted investment returns of 13.2 percent in 2010, up from a 0.6 percent fall in 2009, while continuing to lag the broader UK property investment market for the sixth year running, a study showed on Wednesday.
The Investment Property Databank (IPD) Regeneration Index showed the year-on-year improvement was driven by an increase in investor demand for retail warehouses in regeneration areas.
“This is a disappointing return when compared with the IPD UK Annual Index total return of 15.1 percent year on year, but it is not a surprise considering investors’ lack of appetite for assets outside prime markets,” IPD research manager Greg Mansell said in a statement.
The regeneration areas surveyed typically cover the fringe of major towns and cities.
Total returns in the office and industrial sector lagged that of retail, dragged down by poor capital value growth versus the UK average in 2010, the report said.
The UK commercial property sector is facing strong investor rivalry for its prime assets, particularly in London where demand is fast outstripping supply, leading some investors to contemplate buying into “upper secondary” properties.
In June, IPD said British commercial property values rose 0.1 percent in May, unchanged from April, putting greater focus on rental income returns as the sector recovers.