UK commercial property recorded a negative total return in July, according to MSCI.

A total return of -2.4% was largely driven by a 2.8% decline in capital values.

The IPD UK Monthly Property Index measured the performance of 3,341 property investments with a capital value of about £47bn.

MSCI said that July – the first full month after the UK voted to leave the European Union – marked a major decline in total returns and capital values since the global financial crisis.

The slide in capital value of 2.8% was the greatest fall since March 2009, when the index registered a capital value decline of 3.1%.

Colm Lauder, vice president of MSCI, said the July decline, coupled with a 0.3% decline in June, indicated that the market is “formally in recession” following the Brexit referendum, with weak investor sentiment hitting yield pricing.

“The fall in values during the month of July is the biggest such decline since the mid-point of the global financial crisis in March 2009,” he said.

The UK market, especially in London, had been keenly priced in the run up to last month’s vote, Lauder said, with yields at historic lows and income returns amongst the least competitive in Europe.

“The record pricing in the real estate market could leave little room to buffer economic or political shocks, like Brexit, with values potentially falling further as occupier sentiment weakens,“ he said.

Capital value declines were particularly pronounced in the office sector in central London, where values fall by 3.6%.

Income return in the index remained unchanged at 0.4%.

However, market rental values switched negative in July.

MSCI said incomes may come under pressure in the medium-term if further declines are recorded.