Contrary to expectations, yields on most commercial property are falling and this trend may continue as inter- est rates fall. Although the manufacturing sector is in recession, strong economic output from distribution continues to sustain demand for industrial property. Compared with residential property, where the average house price rose by 164 per cent in the 10 years to June 30, 2005, the capital value rose by only 48 per cent, according to the Halifax house price index. But strong rental income meant the return over the 10 years was 205 per cent.The fund I like best is New Star property unit trust. It holds about 60 per cent in property, with 68 per cent invested in office property, 10 per cent in retail warehouses, 12 per cent in ind- ustrial property and 7 per cent in retail units. It also holds about 16 per cent of its portfolio in property shares. This part of the portfolio is managed by Stephen Whittaker. The balance of the portfolio, amounting to about 22 per cent, is invested mostly in deposits and convertibles. Past performance is excellent – up more than 63 per cent to August 1. It has shown a positive return in the past five years, unlike the average UK equity fund which showed a loss over the same period. Every portfolio designed for realistic or conservative investors should have 10 to 15 per cent in commercial property and, with the first-class management team at New Star, this trust should continue to do well.