UK commercial property values fell by a further -0.3% in February 2012, as stagnant regional growth and growing fears of a mild second recession took their toll. Total return was 0.3%, according to the IPD UK Monthly Index.
“Weakening occupier demand underlies this month’s fall in values, and outside of London this is now having a notable drag on performance results. Sluggish regional economic growth, compounded by government austerity measures, contributed to a -0.1% reduction in rental values at the all property level. Some of the more regional markets saw rental value declines of up to -0.6% in the month,” commented Phil Tily, managing director of IPD.
“Outside of London, there was only one market segment, of the 32 we measure monthly, that saw positive capital value growth in February (Outer South East industrials). Slowly but surely, markets that experienced some recovery since the recession have been dropping back into negative territory as uncertainty, economic inertia, and falling levels of personal spending have dampened sentiment.”
“The retail sector, which posted snapshots of optimism within sales reports in the immediate aftermath of Christmas, continued to be the worst hit area of the market, losing 0.4% of its values over the month. Shopping centre values outside of the South East saw the most notable decline of any property type at -1.6% during February. The overall contraction in the retail sector is being reflected in our performance numbers,” continued Tily.
IPD said despite some fears of a bubble in City office prices at the start of the year, demand for City prime from international investors has helped contribute to successive 0.2% improvements in capital values in both January and February. These robust growth rates have edged the City ahead of West End and Mid Town offices in the performance rankings for the start of this year. Central London Retail and Office markets remain the strongest parts of the market on a rolling 12 month basis.
The IPD UK Monthly Property Index is based on a sample of 3,630 properties covering £33.9bn at the end of February 2012.
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