A REPORT on the commercial property market shows that it performed ahead of predictions in the first half of the year. Overall returns of 7.1 per cent for the six-month period bring the annualised rate of return to 14.4 per cent. The pace of growth has been higher than in 1995, according to the Jones Lang Wootton Property Index.

The market has been waiting for indications of an increase in rental values in older offices. JLW says this now appears to be happening, albeit slowly. Office rental values rose by 2.7 per cent between January and June, as rent reviews provided some evidence of an increase. This contributed to the increase in office capital values of 3.1 per cent for the first half of the year.

Although much of the focus has been on offices, the report shows the industrial sector has quietly turned in a very good performance. Industrial rental values rose by 5.8 per cent in the first half of this year and by a healthy 11.7 per cent in the year to June, 1996. Strong competition for investments in this sector has further improved yields and industrial capital values rose by just under 6 per cent in the first half of the year.

JLW says the retail sector is putting in a steady performance, with capital growth of 5.5 per cent and rental growth of

4.4per cent at the end of June. Rental growth in Grafton Street is still a feature, although less so elsewhere. Yields on Henry Street appear to be improving.

The index is based on a portfolio valued at £83 million and extends back to 1969. It is published twice annually.