UK property returns continue monthly decline
UK commercial property continued to decline last month, taking the all property total return for the 12-month period to a record low.
The IPD monthly property index, which is compiled by the Investment Property Database, recorded a -1.3% return last month – a slightly reduced fall compared to the preceding month, when the all property return stood at -1.5%.
On a rolling 12-month basis, the all property total return hit -16.1% – a new record low for the IPD index. The previous worst annual return for the monthly index was -8.1%, which occurred in April 1991.
All sectors recorded falls last month – offices slid to -1.1%, while retail and industrial properties also worsened to -1.5% and -1.4% respectively.
IPD director Ian Cullen said: “July was the first month of this month in which all three sectors reported negative rental value movements. These movements were still all very small, however, and the downward pressure on capital values remains overwhelmingly the same as it was a year ago – yield decompression.”
Last month recorded -0.1% rental growth – representing a 60 basis point deterioration compared with June, “suggesting that landlords will be having more difficulty in pushing through rent increases”, the IPD said.
The pace of decline in capital growth slowed fractionally from -2.0% in June to -1.8% last month. In May, capital values fell by -1.2%.
The fall in the index comes as developers are increasingly cutting back on development on the back of fears of higher vacancy rates.
Yesterday, British Land, the UK's second largest real estate investment trust, announced that it is delaying the construction of a proposed skyscraper in the Square Mile, the 224.5 metre-high Leadenhall Building, while it reviews occupational demand.
The company also reported a 5% fall in its portfolio valuation in its first quarter results. For the three months to June 30, it said its net equivalent yield across its portfolio rose 22 basis points – as property values fell – in the period, taking it to 5.8%.
-- Write to Darren Lazarus at dlazarus@efinancialnews.com
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