Returns from commercial property are set to slow sharply in 2006 following a robust commercial property market this year, according to the Royal Institute of Chartered Surveyors (Rics).

Due to huge investor demand, the UK commercial property has performed extremely well in recent years. But while investor demand for commercial property is set to hold steady, it will not be sufficient to prevent a slowdown in overall returns, warns RICS. Last year total returns soared to 18.3%, while Rics predicts returns will drop to 13.4% this year before falling to 6.6% in 2006.

A Rics spokesperson said: "We expect investment demand to remain firm in 2005, with rising capital values continuing to attract investor money into the asset class. The growth in capital values will slow however, as rising interest rates and perhaps modest strength in the equity market reduce the relative attraction of commercial property. We expect capital values to stabilise in the first half of 2006 as commercial property yields bottom out and then edge higher."