IPD announced on Friday that its UK Annual Property Index reported in 2007 the biggest fall in commercial property returns since 1990. The change in the capital value of investments in UK commercial property over the year was -7.7%, and the total return to property investments was -3.4%. This turnaround was driven by a sudden collapse in investor confidence after the summer, triggered by pervasive financial sector uncertainty.
IPD announced on Friday that its UK Annual Property Index reported in 2007 the biggest fall in commercial property returns since 1990. The change in the capital value of investments in UK commercial property over the year was -7.7%, and the total return to property investments was -3.4%. This turnaround was driven by a sudden collapse in investor confidence after the summer, triggered by pervasive financial sector uncertainty.
The underlying income stream from property actually grew strongly, with rental values rising in all sectors and up 4.6% year-on-year overall. Rental values grew particularly strongly for West End Offices, rising 18.6%.
'The 2007 results have to be put into the context of a very strong run of returns to commercial property, indeed total investor returns remain over 10% per annum on a three-, five-, 10- and 20-year basis. All eyes should now be focused on the occupier markets: a weak economy will feed through to weaker rental growth, but any strong economic news should bring buyers back into the sector,' said Malcolm Frodsham, research director.
The IPD UK Annual Property Index is based on a sample of 12,234 properties from 287 funds covering £183.8bn at the end of December 2007.
