While rents in the commercial property market rose across the board last year, the Georgian office sector outshone the rest, increasing by 31.6 per cent.

The latest statistical bulletin from Lisney on the year up to January 1st last shows that while Georgian rents dropped to around £7 per sq ft in 1993, they have enjoyed a dramatic recovery over the past three years, accelerating during the past twelve months to reach a new all-time high.

The agency notes that because of the small lot sizes and the availability of larger property investments, Georgian offices are now less favoured by the institutions and have a reduced weighting in their portfolios.

Lisney's composite index - the weighted average of the four individual property sectors - rose by 12.8 per cent in 1997.

However, the agency reports that the unit-linked property sector recorded a disappointing overall growth level of 2.6 percent. With one of the largest funds doing particularly badly, and the weighted nature of the indices, this resulted in a lower overall figure. Another contributing factor was that passing rents do not react quickly to change, as they are dependent on the five- and seven- yearly rent reviews.

Lisney says that capital growth over the past three years has been driven by falling yields as a result of historically low interest rates and the strong performance of the economy. Yields were now at an all time low and future growth generated in this way will be in very much smaller increments.

It appears evident that the main capital growth in the future will come as rent reviews absorb the market growth into the portfolio returns.

Conversely, the equity sector, which reacts almost instantaneously to market trends, recorded an annual increase of 20 per cent over the year and more than 80 per cent for the last five years, compared with the corresponding property increase of 44.2 per cent.