UK commercial property returns ended 2008 at -5.3% in December, according to the IPD UK Monthly Index, in a month which saw a third consecutive record capital value fall of -5.8%.

The final monthly figure brings All Property capital value falls over 2008 to -27.1%, while the overall peak-to-trough decline – since the onset of the current property market re-pricing cycle began in July 2007 – now stands at -35.5%.

Over 2008 investment in UK commercial property produced an All Property total return of -22.5%. This compares with a return of -29.9% by the FTSE All Share Index, 15% by the FT Gilts 5 - 15 Years Index and -46.6% by the FTSE Real Estate Index.

While All Property income returns have remained robust over 2008, at 6.1% compared to 4.9% in 2007, the impacts of widening yields across all sectors on capital values and recently weakening rental values have resulted in the lowest annual capital growth since the inception of the Monthly Index.

At sector level, capital value falls over the year in Offices and Retail have seen less than one percentage point difference – at -27.2% and -28.0% respectively – but they have reflected slightly different pressures. In Offices there has been greater strain on rental values, gathering pace over the final quarter of the year with rental values falling by -3.8% over the year.

By comparison, the Retail sector has suffered more painful yield impacts on capital values, which have accelerated over the final quarter as severe trading conditions forced several high profile retailers to fall into administration. Retail yields moved out from 6.0% in January 2008 to 8.1% in December 2008, whilst Retail rental values fell by only -0.4%. Capital values in the Industrial sector fell by the least of the three main sectors over the year – although still substantial at -25.5%.