Commercial property capital growth remains positive: IPD

UK commercial property delivered a 15th consecutive month of positive capital growth in October, albeit at just 0.1%, according to IPD UK Monthly Index. Last month's fractional positive growth brings the compounded upturn in values to 15.9% since the recovery emerged in August 2009, while the 12-month capital growth rate now stands at 12.2%. Over October, income returns of 0.6%, together with the positive capital growth, contributed to a total return of 0.7%.

Positive capital growth has decreased to minimal levels in both the retail and office sectors, at 0.1% each, while values declined in industrials for the third consecutive month, at minus one basis point. The subdued performance is due to virtually flat rental value growth, a fall of just one basis point over October, offset by a slight positive yield impact, at 24 basis points.

'The continued modest positive capital growth in the UK commercial property market reflects an attenuation of yield contraction and rental declines,’ explains Phil Tily, Managing Director at IPD UK. 'Over the year to date, values have risen by 6.5%, predicated on a 70 basis point yield contraction, to 7.4%. Rents have had a negative influence, falling by one percent, over this time period.'

The IPD UK Monthly Index measures 3,651 properties worth £32.9 bn (EUR 38.8 bn) as at October 2010.