Belgian commercial property delivered its highest return since 2008 last year, at 4.6%, according to the IPD Belgium Annual Property Index. The improving returns were delivered despite a third consecutive year of capital decline, at -1.2%, though this represents a considerable slowing of capital depreciation, by 140 basis points, from the -2.6% suffered in 2009.

Income return incurred a moderate fall from 6.2% to 5.9% in 2010. However, while in line with European commercial property trends, this performance hides disparities between the main sectors. For the fifth consecutive year the Retail sector remained the most competitive with a headline return of 10.4 % in 2010, annualized over five years retails delivered a competitive 11.4%. Office sector returns fell in 2010, to 3.0%, a decline of 50 basis points from 2009’s 3.5%, making it the worst performing sector in the Belgian property market, while the Industrial sector has shown some signs of recovery with a 3.7 % total return, compared to 0.4 % in 2009.

Retail was the only sector to record positive capital growth, of 4.3%, a huge improvement on the -1.4% delivered in 2009, and largely a result of growth in the Shopping Centre segment, which saw capital appreciation of 6.0%.

Since 2008, the Office sector has suffered a persistent capital decline, dropping to -2.7% in 2010, due to the high capital decline in the suburban zones of Brussels, caused by increasing vacancy rates and falling rental values, which in 2010 dropped to -1.2%.

'Each sector seems to have recovered from the crisis at their own pace, and like the rest of Europe we are seeing a disparity between sectors, related to asset class and geography. While the Office sector suffers, dragged down by suburban assets in Brussels, the Retail sector is booming due to the expansion of Shopping Centres,' said Sébastien Rennotte, IPD's Belgium manager. 'In 2010 Belgian commercial property did not experience the high positive returns of some of its European counterparts, but this is due to the inherent stability of the Belgian commercial property - there is less to recover from. On a three year basis, Belgian commercial property compares well against its neighbours.'

Compared to other asset classes, the IPD Belgium Index total return lagged behind equities (6.1%) and property equities (10.1%) in 2010. On a five-years basis, at 6.1%, the Belgian index outperformed all the major asset classes from equities (-2.9%) to bonds (3.6%).