The overall returns from commercial property in the first three months of this year came to 7.5 per cent, a figure marginally behind equities' performance of 8 per cent. Both these asset classes performed well ahead of government bonds, which returned one per cent.

The SCS/IPD Property Index shows total return has been steadily rising since 1996, a result of continually increasing rates of rental growth and falling yields. Since mid-1998, its 12-month performance has exceeded those of both equities and gilts, and its latest is the highest on record. IPD's returns of 7.5 per cent for the first quarter of this year was somewhat higher than the 6.8 per cent reported last week by Jones Lang LaSalle.

However, the IPD figures were lower than in the last quarter of 1998. The fall was greatest in the retail sector, where returns more than halved, and least in offices, where they fell by less than a fifth. Total returns on offices in the first quarter, at 9.7 per cent, were far ahead of those on retails and industrials at 4 per cent and 5.7 per cent, respectively. This continues a period of outperformance by the office sector, which started in 1997. On a quarterly basis, rental value growth fell off significantly across all sectors. Over the last 12 months, however, it fell only marginally in retails and industrials and continued to rise in the office sector. Office rental growth of 4 per cent in the first three months of this year contributed to its total return outperformance. This was more than double the rental growth on retails of 1.6 per cent and on industrials of 1.2 per cent.

Office rental growth has now consistently outperformed that of the other two sectors since 1996. IPD says yield movements also contributed to the office sector's outperformance. Yields fell again in the first quarter in all three sectors, marginally in retails and industrials but by over a quarter of a point on offices.

Yields across all three sectors have been falling steadily since 1994.