Although, returns from commercial property have continued to slow down in the UK, with intown shops suffering the most, there are still high-income returns on offer, according to the first Richard Ellis Monthly Index (REMI).

However, the industry has been hit by a rise in stamp duty of 0.5 per cent for all deals over £250,000. It is not as much as the 1 per cent rise expected, but it is the third increase in stamp duty since Labour was elected in May, 1997.

Angus McIntosh, director of research at the commercial property agency Richard Ellis St Quintin, said in the report that a "very high" income return of 7.4 per cent, remains the attractive characteristic of property as an asset class. However, the yield has drifted upwards from 7.2 per cent in September, 1998.

Over the last year, total returns have slowed to 10.9 per cent, compared with 11.5 per cent in the previous month. The latest REMI report covers returns in January, 1999, and notes that capital values have also been affected.

The star performer is the industrial/ warehouse market with a return of 13.7 per cent, according to the report. According to Mr McIntosh: "The worse performing sector is in-town shops, where the total return now stands at 8.8 per cent, compared with out-of-town retail warehouses producing a return of 11.3 per cent. Although the performance in the office market has slowed down, it currently shows a return of 11.9 per cent.

"As the economy goes through a period of slow economic growth in 1999, it is expected that the property investment market will continue to show slower performance, although we still predict a healthy total return in excess of 7 per cent for the full calendar year."

Leading figures in the property industry attacked the budget decision to raise stamp duty on UK property transactions by 0.5 per cent . According to the commercial property weekly, Estates Gazette, it is expected to wipe up to £13 billion off the capital value of commercial property.

A spokesman for the Royal Institute of Chartered Surveyors said: "Clearly this will have a major affect on commercial property and confidence will be badly knocked. Institutional investment has been falling over the years and this will be a further blow. It carries with it the fear of still further increases to come."