2010 will be a boom year for commercial property investment with the best returns for four years, according to Angus McIntosh, Head of Research at London-based King Sturge. He cautioned, however, that the boom year may be a false dawn. 'Total returns may well stay positive but capital values may fall again by 2012,' he said at a property market review on Tuesday.

McIntosh believes commercial occupational markets across Europe will remain soft for two-five years, with rents continuing to fall. 'Take-up of office space (as with others including industrial and retail space) will be very selective over the next year or two. Lack of demand for space in both the private and public sectors will result in very few new development projects for two-five years.'

There will also be an on-going divergence between well let prime investments versus the rest, he added. 'A two-tier commercial property investment market will persist.'

McIntosh said that a combination of monetary policy, fiscal expenditure and quantitative easing in the UK had averted a major crisis, but left a legacy of problems. These include rising unemployment (especially for the under 30s), weak consumer expenditure and a lack of public sector finance which will slow down the recovery. Other problems include rising commodity prices (especially oil and food) driven by demand from the emerging Asian economies and crop failure/climate change. Mild stag-flation in Europe may persist, he added.

'There will be a two speed economy; low income households will widen the wealth differential, potentially leading to greater social unrest,' he noted.