2009 could quite accurately be described as a year of two halves, the first six months seeing a stagnant investment market with sluggish demand, isolated opportunities and very few transactions. In contrast, the second half of the year saw a complete reversal, with exceptional levels of investor demand which - with only limited stock to pursue - drove down prime yields at a level and speed which sometimes proved difficult to keep up with.

Already, it seems apparent that the factors which drove the revival in the second half of 2009 still remain and the early part of 2010 has followed the same pattern. Investors looking to place money into the property market in 2010 will however face different circumstances and challenges and how they choose to overcome them will, to a large extent, dictate the path of the market through the course of the year.

The major change in the market is the level of prime yields, particularly in the office and High Street retail sectors, where demand has been keenest. In early 2009, prime yields were at levels above the long term average and provided an attractive income return without having to rely on rental growth. Now, however, with prime retail yields at 5 - 5.25% and prime offices at 5.5 - 5.75% in Scotland and the North of England, the returns are marginal without additional performance through further yield hardening or rental growth.

Many investors have moved higher up the risk curve for properties with shorter leases or voids, in the search for a higher initial yield. This is a sensible strategy but requires careful stock selection and good advice from your agency team! We would see this as a definite opportunity in the city centre office markets for instance, where a lack of speculative development is likely to result in future supply shortages in specific areas of the market in two - three years time.

The structure of the investment market in Scotland has been fundamentally changed by recent developments, if only perhaps temporarily. The demise of the larger HBOS backed property companies such as Kenmore and Kilmartin (along with a number of others) has left a large hole in the property company sector and, whilst banks continue to avoid lending, opportunities in this sector of the market should be available to the entrepreneurial fund buyer or well funded investor. The forthcoming sale of the Kilmartin assets should be a pointer to those moving to pick up the reins in this sector of the market.

Assuming interest rates remain low, the influx of money into property looks likely to carry on and the weight of demand may continue to widen investor requirements into broader sectors of the market perhaps, even - in selected circumstances - speculative development.