The UK commercial property market outstripped expectations last year but economic and political uncertainty could make investors more cautious this year, F&C Commercial Property Trust said.

Announcing annual results, the FTSE 250 trust said the market stabilised last year after the shock of the 2016 Brexit vote. Overseas and UK investors put money into commercial property in search of a secure income stream, causing a sharp increase in investment from the year before when confidence was knocked by the vote to leave the EU.

Chairman Chris Russell said: “The property market out-performed initial expectations for 2017 but an environment of higher interest rates and inflation, subdued economic growth, political uncertainty and some keen pricing may begin to weigh more heavily on investor sentiment this year.”

F&C's total return for the year to the end of December was 8.7%, underperforming the benchmark MSCI Investment Property Databank index, which rose 10.3%. F&C's annual dividend of 6p a share is unchanged since 2006.

The company said its underperformance was mainly caused by an underweight position in industrial property in the South East, which was the sector's best-performing segment along with logistics.

Russell said: “The market has seen polarisation, with industrials and distribution out-performing strongly, while regional town centre retail has remained under pressure. The company's holdings in the office sector lagged the index because of increased voids and shortening unexpired lease terms. The company has no exposure to shopping centres which was the poorest performing segment.”

F&C said its longer-term performance beat the benchmark. Over three and five years it is in the upper quartile for performance and over 10 years it is in the top quartile. F&C's best performing assets last year included St Christopher's Place in London's West End and Cassini House in St James's.