The UK commercial property market has maintained its fractional capital growth trend, at just 0.2% in February, according to the IPD UK Monthly Index.
Over the month, steady 0.6% income returns contributed to a monthly total return of 0.7%. The annual rate of capital growth has now fallen to 4.8%, down from 6.0% at the end of January. The drivers of capital growth over the month were again largely driven by yield movements, which counted for virtually all of this month's growth, with yield impact registering positive, at 0.2%. Rental values at a virtual standstill, rising by just two basis points.
There were, however, differences in the drivers of capital growth at the sector level. Phil Tily, Managing Director for UK & Ireland, explains: "Offices continue to enjoy the best rental growth, while in retails capital growth was driven solely by positive yield movements. So, different positive forces in the two sectors contributed to a modest rise capital values. By contrast, in the industrial sector, where sentiment appears to be waning, adverse movements in both yields and rents combined to deliver capital depreciation."
Office rental growth was 0.3%, compared with -0.1% in retail and fractionally below zero in industrials. Yield impact for the same sectors was 0.1%, 0.4% and -0.1%, respectively.