UK capital growth fell in the second quarter of
2011 to 0.4%, the lowest rate of growth since Q2 2009, according to the
IPD UK Monthly Index. Capital growth has risen 17.3% in the recovery period.
Capital growth for June was 0.2% and Malcolm
Hunt, UK and Ireland Client Services director, said: “While capital growth
has been positive for the 23rd consecutive month, it is fractional, and likely
to remain under pressure until the secondary market improves.
“Yield compression has continued at a trickle, and rents have failed to pick up
the slack, remaining flat for the quarter. Continuing wider macro-economic
turmoil, and the uncertainty surrounding the secondary market, has meant that
outside of London growth remains largely flat or negative, as investors and
occupiers continue to shy away from risk.”
Sector level rental performance remains unconvincing. Rents in both the retail
and industrial sectors continued to decline, recording -0.1% and -0.2% for the
quarter respectively. Rents in the office sector remained positive, at 0.4%,
though outside of London fell away.
Hunt continued: “Total return, 0.7% for the month, and 2.1% for the quarter,
has been driven almost entirely by income return, which has remained around 0.6%
month on month.
“The importance of active management in the current market cannot be ignored,
the recent spate of retail administrations being a case in point. The latest
administrations could wipe up to £393 million from rent payments to UK landlords
over the course of their leases, though of course actual losses are being
mitigated by pro-active asset management.”
Since capital growth turned positive, 23 consecutive months of growth have seen
values recover by 17.3%. On a 12-month rolling annual basis, capital growth has
slowed to just 2.0%.