UK commercial property returns for 2008 look set to surpass the landmark losses recorded in 1990, on a real returns basis, with All Property total returns now at -18.2% over the 11 months to November 2008, compared to an inflation-adjusted return of -16.2% almost 18 years ago on the UK Annual Index. The largest ever annual total returns loss for UK commercial property, on a real return basis, was -29.4% recorded back in 1974.

For the second month in a row total returns and capital values for UK commercial property have broken records for the largest monthly falls with returns of -5.1% and - 5.7% respectively, according to the November IPD UK Monthly Index. Over the year-to-date All Property capital values have fallen by -22.6%, and over the last 16 months by -31.5%. This compares to capital value falls of -27.0% between November 1989 and May 1992.

The combined drivers of capital movement – yield impact and rental value growth – remained in negative territory over November, explaining the observed dramatic falls in capital values. Yield impact, the effect of the movement of yields on capital values, was -5.3% month-on-month for all UK property whilst the market witnessed a weakening of rental values at -0.5% month-on-month. A modicum of good news comes from sustained income levels, with the All Property income returns providing 55 basis points, despite a slight increase in voids.

At the sector level, Offices overtook Retail as the steepest faller, with capital value falls of -5.8% and -5.7%, respectively. Since April, rents have fallen faster in Offices than Industrial or Retail, at a rate not seen since July 1993, at -1.4%. Overall the total returns for Offices, Retail and the Industrial sector were -5.3%, -5.2% and -4.8%, respectively.