Commercial property sector secondary values will continue to fall in 2013, reflecting dwindling investor demand, according to Cluttons.

In its Q3 Commercial Property Market Outlook, they report that persisting economic uncertainty and knocked business confidence continues to transfer poor performance to the property market, impacting on returns. Capital values have fallen, however it is becoming evident that a further reduction is needed to attract investment in relation to regionally located secondary assets.

Sue Foxley, head of research at Cluttons, said: “Apart from a narrowing band of assets still considered as being ‘prime’, wholesale re-pricing in secondary stock is well underway. However, there remains a wide void between the perceived pricing of buyers and sellers and we believe this process still has some way to go.”

The research report that, as yield returns begin to draw to a close for investment focused on prime Central London offices, the potential of secondary stock and alternative asset class investment is beginning to surface. Sue Foxley states that “the industrial and distribution sectors have been earmarked as ‘rising star’ sectors which will attract renewed investor interest in 2013, while average office property returns are expected to continue to struggle.”

The retail sector is also set to suffer further as home shopping gains increasing popularity and retail rents outside of London and the south east will fall by a further 2% in 2013, following the 4% decline anticipated this year. This, coupled with limited stock availability, is likely to boost further investor interest in the industrial and logistics sectors as overseas investors and UK REITs review the market for opportunities.