The latest Real Estate Investment Forecast from Colliers International shows more worries ahead for the UK retail sector.

The retail sector is expected to have the weakest returns within the UK commercial property market. Internet sales continue to take an increasing market share.

Colliers say that with this slow erosion of traditional retail outlet trading, private cash buyers and institutions are interested only in prime product. Secondary assets, especially those owned by leveraged investors are now of less interest and are most vulnerable to administrations and operator restructuring.

Although demand for secondary and tertiary UK property assets has been very weak, given ongoing risk aversion by UK institutions and funds, there appears in the last few weeks to be some renewed interest in the best of secondary assets.

Overseas investors continue to drive the market accounting for around 64%, or some £1.6bn. The IPD reports that City yields compressed from 7.0% to 6.6% since the beginning of 2011, with prime yields reported to be around 5.25%.

Rahim Jiwani, Property Economist at Colliers International commented: “Uncertainty has returned to the fore, with the Eurozone mayhem and potential economic impact of a Greek default along with the British public’s ongoing struggle with deleveraging their personal balance sheets and its effect on UK aggregate demand.

“While the Greek worries might be bullish for UK property, weakening consumer demand can only mean further pain as the struggles of the UK retail sector would attest."