UK commercial property capital values fell by a further 8.7% in the first quarter of 2009. The decline has slowed noticeably since the record 14.3% fall recorded in Q4 2008, according to the IPD UK Quarterly Property Index published today. Income return also edged up to 1.7%, from 1.5% last quarter, largely as a product of the continuing falls in asset values.
The All Property total return was -7.1% over the quarter, which still just exceeded that of equities (at -9.1%), but lagged well behind bonds which returned 2.2%. In contrast the decline in rental values gathered pace, from the -1.5% fall recorded in Q4 2008 to -3.0% in Q1 2009.
The Industrial sector marginally outperformed the other main asset types, with a capital value decline of 7.6%, compared with the -9.0% write down suffered by both the Retail and Office sectors.
All Property equivalent yields rose to 8.9% in the first quarter of 2009, from 8.2% last quarter.
The IPD UK Quarterly Property Index is the UK's most comprehensive quarterly measure of property investment market movements in values and returns, reflecting the performance of a databank of more than £80 bln.
Malcolm Frodsham, IPD Research Director said: "Real estate has endured a rapid fall in capital values in response to a wave of selling from both retail and institutional funds. These funds may be emerging from the pressure of forced sales designed to shore up balance sheets and meet redemptions, but the impacts of an economic recession are now being felt, and rents are falling rapidly across a broad spectrum of assets."