Capital appreciation in UK commercial property markets has eased to the shallowest monthly growth, at 0.1%, since the rebound began last summer, according to August's IPD UK Monthly Index.
According to the Monthly Index, UK property values have risen by 15.6% in the last 13 months, while the 2010 year-to-date growth now stands at 6.2%. The month is marked by the industrial market delivering the first sector capital depreciation since the recovery, at a fractionally negative five basis points, while retail and offices rose by 0.1% and 0.2% respectively (see chart).
The sector recoveries have differing beginnings and now endings. Prior to this month's capital depreciation in industrials, the sector completed a 13-month unbroken 10.8% capital growth to July but still reported the shallowest rebound among the sectors. This compares to the 14-month rebound in the retail sector, which has so far amounted to 18.7%, and a 13.9% value rise in the office sector over the 12 months to August.
The rental picture also reflects a deviating pattern. After a 0.1% rental growth in the industrial sector over July, rents have declined again by approximately the same amount, while retail rents have completed a -9.3% unbroken decline since September 2008. By contrast, office rents rose for the fourth consecutive month in August, by 0.1%, and by 0.6% since May. The office market is the only sector to benefit from both rents and yields having a positive influence on capital growth, albeit at modest levels.
Phil Tily, Managing Director of IPD UK, said: "On the eve of the two-year anniversary of the collapse of Lehman Brothers, it is worth remembering the property market storm which erupted two years ago. Subsequent to the investment bank's demise, property values declined at the fastest pace in the history of the IPD UK Monthly Index.
"Two years on and markets have for now at least plateaued as rents and yields moved fractionally in August following the trend of recent months. However, calm periods are as good a time as any to reinforce the message that investors should remain vigilant of any risks within their property portfolios."
The IPD UK Monthly Index measures 3,586 properties worth £32.4 bln. as at August 2010.