IPD UK index: January property returns negative but improving

Total returns on the Investment Property Databank (IPD) monthly index for direct investments in UK commercial property were negative in January but showed an improvement on the previous month. Total returns in January 2008 were -1.6%, an improvement on the December 2007 total return of -3.7% and giving a 12-month total return of -7.6%. IPD said capital growth had also 'improved' from -4.2% in December 2007 to -2.0% in January while income return edged up to 0.5%.

'The index had the worst January on record but at least the rate of decline has attenuated following the writedowns in November and December,' IPD research director Malcom Frodsham said in a statement. 'The index is back to where it stood in June 2006 and commercial real estate has still returned a healthy 9% per annum total return over the past three years.'

IPD also noted that commercial property significantly outperformed equities, where returns in January were -8.7%, but lagged behind property equities, where returns were 4.8%.

Offices remained the leading commercial property sector in January, with total returns of -1.5%, while the industrial and retail sectors posted -1.6% and -1.8% returns respectively.

Rental value growth decreased slightly, from 0.2% in December to 0.1% in January.