Cluttons’ latest report on the outlook for the commercial property market predicts total returns will reach 6.5 per cent in 2016, which is less than half the 13.8 per cent return achieved last year and a third of the 19.3 per cent reported in 2014.

The estate agency’s head of research, Faisal Durrani, said: “The UK commercial property investment landscape is being subjected to some challenging headwinds. Chief of these is of course the risk of a Brexit and the deteriorating global outlook. The uncertainty and nervousness being fuelled by the in-out EU referendum is impacting the value of sterling and the volume of property transactions.”

“If the UK were to vote to leave the EU, property values are likely to fall. Conversely, if the UK remains in the EU, there may be a rise in the value of sterling, which could make the UK look a lot more expensive than it is now to international investors.”

Cluttons ‘ head of UK valuations, John Barrett, said that with a current income return of 4.8 per cent, commercial property still remains fairly priced in comparison to other markets such as 10-year gilts, which currently yield around a 1.5 per cent.

“This compares to the previous market peak at the end of May 2007 when 10-year gilts returned 5.28 per cent compared to the monthly IPD income return of five per cent, that is, a positive yield gap of only 28bps.

“This means that commercial property is in a much more robust shape to cope with any economic downturn and unlikely to crash when compared to 2007/8.”

Cluttons also argued that because the occupier markets are not over-supplied, there is still value to be had in terms of rental growth especially within the office and industrial sectors, due to limited speculative development in recent years and strong occupier demand.

“Future performance from direct property investments will need to come from the traditional fundamentals of rental income growth and asset management initiatives such as change of use, lease restructuring and refurbishments,” he said.