Every European commercial property market has suffered a unilateral fall in annual capital growth in 2008 compared to the preceding year, as measured by the IPD Pan-European Property Index, in a calendar year which saw only one country, Switzerland, produce a positive capital growth, at 1.2%. Ireland had the worst performance in 2008 with negative capital growth of 37.2% and a net return of 34.2%.

According to the Index, now in its eighth year, capital values in local currencies fell by a record -8.8% last year, with the steepest depreciation in Ireland and UK. Annual income returns rose over the 12-month period by 28 basis points, to end last year at 5.3%, contributing to a total return of -4.0%.

At the sector level, negative capital growth was most pronounced throughout Europe in the Industrial sector, at -15.6%, followed by Retail, at -12.3%, and Offices, at -8.7%.

The impact of currency movements on total returns conversions was significant. Over 2008, sterling depreciated significantly, meaning that returns in sterling were strong with a total return of 16.7%. Conversely, the UK return when measured in euros was considerably weaker and brought down the Pan-European total return in euros to -11.4%. The total return in US dollars was slightly weaker than euros, at -15.7%. This was because of the depreciation of the pound and the slight appreciation of the dollar against the euro after the dollar's low towards the end of 2007.

Last year on a total returns basis, in every European market which the London-based property index company IPD measures, government bonds were the strongest performer with equities the worst and property sitting in the middle. Now only over the very longest periods do equities outperform.

Annualised total returns in local currencies over the three, five and eight years are 4.6%, 6.3% and 6.5%, respectively. In euros, returns are 1.0%, 4.5% and 4.8%, respectively.

Ian Cullen, Co-founding Director at IPD, said: "A euro-denominated investor will have seen 15.8% wiped of the value of a pan-European portfolio in 2008, this reflected falls in capital values in 15 out of the 16 markets in Europe which IPD measures – a greater degree of synchronization that we have seen before. However, money invested outside the eurozone will have seen a double hit – high falls in capital values coupled with weakening non-Euro denominated currencies.”

The SCS / IPD Irish Quarterly Property Index for Q1 2009 shows total returns for the three months to March 2009 were -9.3%, compared with -16.8% the previous quarter. The return for the year to March 2009 stands at -39.1%.

Capital growth was -10.9% in Q1 2009, less severe than the -18.0% recorded in Q4 2008, whilst income return also edged up to 1.7%.

Commercial property underperformed both equities and bonds, where returns were -5.0% and -5.6% respectively.

Rental value growth decreased from 0% in Q4 2008 to -3.2% in Q1 2009.

The leading sector was retail with a total return of -9.0%, whilst the industrial and office sectors returned -9.3% and -9.6% respectively. All Property yields rose to 7.4% in the first quarter of 2009, from 6.7% last quarter