Seven monthly fall in a row for UK commercial property values
21-06-2012
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Total return slid to 0%, as income return, steady at 0.5%, was no longer sufficient to offset the negative capital movements, according to the latest IPD UK Monthly Property Index. Confidence in the UK property sector fell amid concerns surrounding the Greek elections, but the lower volatility of the asset class, when compared against variations in returns in the equity market, has acted in its favour. Total return has fallen to its lowest level since June 2009, which is bleak reading for an industry still struggling with re-financing,? said Phil Tily, managing director of IPD UK and Ireland. But he also pointed out that its not all doom and gloom in the UK market. ?Despite the uncertainty caused by wider economic factors, or perhaps because of it, returns in London remain resilient. Values in the City and West End office markets grew by 0.9%, and 0.3% respectively, and in Central London retails by 0.9%, he explained.
The fact that London can continue to grow, even in such difficult times, lends cheer to an otherwise challenged marketplace, he added. At the sector level, retail property saw the largest declines in value at 0.7%, whilst office and industrial units fell by 0.3% each. Within the struggling retail sector, shopping centres suffered particularly, seeing falls in value of 1.2% in London and the South East and were down 1.3% in the rest of the UK. Rental growth, at the all property level, remained flat. ?It remains to be seen whether the latest Greek election results will have a stabilising effect on the Eurozone, or whether they will prolong the uncertainty, said Tily. Values have now fallen by a cumulative 1.6% in the last seven months, and are 35.3% from their June 2007 levels.
