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The long drawn out decline in UK commercial
property capital growth, in July dipped to its lowest rate since the recovery
began, according to the
IPD UK Monthly Index. Despite the UK market now seeing two full years of
positive growth, declines in retail values leave offices as the only sector
experiencing capital appreciation.
"With a 0.1% improvement in capital values
this month, the balance between the performance of prime assets and the more
challenged secondary markets remains finely poised," said Phil Tily, UK and
Ireland managing director.
"Challenges within the wider economy have put further
pressure on the market. The declines in the retail sector being a case in point.
Consumer spending falls are impacting on occupier demand and while retail yields
remained steady, a -0.2% drop in rental values has prompted a -0.1% decline in
retail valuations for July.
The capital depreciation seen amongst unit shops in the
rest of the UK has this month spread over to outer London and the rest of the
South East. At the other end of the spectrum, London offices continued to record
strong capital growth, which kept the overall levels for the office market
positive for the month. "
Tily added: "While the Eurozone crisis and the American downgrading has
led to a lot of talk regarding the UK as a „safe haven,‟ the slowdown in the UK
economy has limited levels of growth in this month‟s results.
"That said, while yields on Government bonds remain low
and with further uncertainty in the equities markets, property continues to hold
its own against other asset classes. Yields at an all property level are 6.3%,
delivering an income return of 0.5% for the month."
24 consecutive months of positive capital growth has seen
values recover by 17.6%. On a twelve month rolling annual basis, capital growth
has slowed to just 1.9%.
UK Monthly Property Index is based on a sample of 3,678 properties covering
£34.3bn at the end of July 2011.