The UK commercial property market may achieve returns of over 20% this year, making it the strongest return the country has seen in the last quarter century, according to the latest research published by real estate fund manager M&G Real Estate.

With liquidity in the market and increased investor confidence, performance for the year is forecast to be exceptional although in the medium term the firm’s research anticipates the market reverting to the trend level of returns between 6% and 8%.

‘The UK Real Estate Market Outlook – September 2014’ highlights that heightened confidence in the UK’s economy, with growth ahead of its closest competitors, the US and Canada, is triggering increased occupier demand – particularly in the office and industrial markets. This demand is resulting in lower vacancy rates and accelerating rental growth.

At a time of low supply of stock owing to previous constrained levels of construction, the UK property market is now attracting substantial interest from both UK and international investors. Rapid yield compression, aided by rental growth, has pushed average capital values up by 6.7% over the six months to August 2014, according to IPD.