After another bubbly performance in 1999, many people are asking if the property investment market has got something left, or is it going to run out of steam? I believe it has more to go and that there are sound reasons why this is so.

Looking backwards first, 1999 was another spectacular year for property investments. Total returns were about 30 per cent, slightly less than last year's exceptional 38 per cent. However, there are signs that the rate of growth has been decelerating slightly since March, 1999.

At £700 million, the volume of transactions last year was up £100 million on 1998. The funds were more active, amounting to about 45 per cent of the total, principally due to pre-funding activities such as The Pavilions Shopping Centre, Swords (£60 million) and Liffey Valley Retail Park (£50 million).

Private investors, although very active, had less product to choose from and in particular, there were few tax-based investments available. What about 2000? With the economy continuing to grow (though at a more moderate rate of 6 per cent compared with 8 per cent in 1999), the demand from end users for property will continue and therefore the prospects are for continued rental growth in most sectors. As far as yields are concerned, there is no doubt that we have seen the bottom of the interest rate cycle and short-term interest rates have started to rise, albeit gradually. This must limit the scope for further downward movement in property yields.

The forecast, then, is for continued growth but at a more subdued level. The total return will probably be in the teens this year, which is still attractive compared with other forms of investments, such as gilts and equities. In addition, shortage of stock will keep upward pressure on prices.

Funds are likely to be the big players, with the Irish funds perhaps being supplemented by UK and European funds.

There will be continued demand from private investors, although shortages of stock may force some of them to look further afield in the UK and Europe. Changes in pension schemes in the Finance Act 1999 will mean that there will be a growth in demand for property investments, as self employed and proprietorial directors opt for Approved Retirement Funds (ARFs) rather than annuities. This could accelerate if, as promised, the legislation is widened to include company operated pension schemes.

Due to the slight rise in interest rates, private investors will look to investments with a higher return, such as industrial, secondary and retail, and opportunities in provincial towns and cities.

As far as supply is concerned, standing investments will again be limited, although some private investors may decide to cash in while Capital Gains Tax remains at 20 per cent.

Retail investments will be thin on the ground in Dublin, so investors will increasingly look to provincial towns for funding opportunities in shopping centres and retail warehouse parks.

Few offices opportunities will present themselves in the city centre, but the development of the docklands will start to gain momentum and funding opportunities will arise there, as well as in office parks. With the rapid expansion of outlying towns around Dublin such as Navan, Newbridge, Mullingar and Carlow, funds are likely to be tempted by the higher returns that will be available from shopping, retail warehousing and office park schemes in these locations.

Corporate disowner ship is a growing trend and will gain momentum this year. An example was the sale and lease-back of the Microsoft buildings in Sandyford Industrial Estate. This is now an option being looked at by many large multinational companies and will provide opportunities for funds and also for property companies which are prepared to take a more flexible approach to break clauses and non-standard lease structures that are often required by US multinationals.

In summary, the market won't fall flat after the millennium celebrations: it will be another good year of growth, maybe not as spectacular as 1999, but well ahead of other forms of investment.

Ian French is chairman of Hamilton Osborne King.