The UK industrial real estate market experienced its fastest-ever correction in the second half of 2022, according to the MSCI UK Quarterly Property Index.
Capital values fell by 26% between July and December last year, prompting MSCI’s head of EMEA real assets research Tom Leahy to say the sector had “never recorded such a loss of value in such a short time”.
Since the middle of 2022, yields on industrial property have since increased by more than 120bps.
“Price discovery between buyers and sellers of privately-traded real estate can impede transaction activity during periods of uncertainty,” Leahy said in a blog post.
“While the decline in capital values is unwelcome news for property owners, the already-substantial correction may allow the market to start trading in greater volumes.”
Overall, commercial real estate capital values fell by 12.8% in the fourth quarter of 2022, according to the index.
Total returns for all UK commerical property was negative for Q4 (-11.9%) and for 2022 as a whole (-8.9%).
“A 12.8% drop in all-property capital values in the last three months of 2022 was the major drag on performance as high inflation, rising interest rates and a higher cost of capital all impacted the market,” Leahy said.
Quarterly rental growth remained positive for hotel, office, residential and industrial property, according to the index.
“A widely forecast economic slowdown in the UK will, however, likely act as a headwind through 2023,” Leahy added.
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