IPD: UK property falls set to beat landmark 1990s crash

The negative returns for UK commercial property for 2008 look set to surpass the landmark losses recorded in 1990, on a real returns basis, IPD UK Index shows. All property total returns amounted to -18.2% over the 11 months to November 2008, compared to an inflation-adjusted return of -16.2% almost 18 years ago on the UK Annual Index. The largest ever annual total returns loss for UK commercial property was -29.4% recorded back in 1974.

Ian Cullen, IPD co-founding Director, said: 'With an 11-month nominal return to November of -18.2%, we are precariously close to the worst 12-month real return on record - to date that of 1974 at -29.4%.'

For the second month in a row total returns and capital values for UK commercial property have broken records for the largest monthly falls with returns of -5.1% and - 5.7% respectively, according to the November IPD UK Monthly Index. Over the year to date All Property capital values have fallen by -22.6%, and over the last 16 months by -31.5%. This compares to capital value falls of -27.0% between November 1989 and May 1992.

The combined drivers of capital movement - yield impact and rental value growth - remained in negative territory over November, explaining the observed dramatic falls in capital values. At the sector level, offices overtook retail as the steepest faller, with capital value falls of -5.8% and -5.7%, respectively. Since April, rents have fallen faster in offices than industrial or retail, at a rate not seen since July 1993, at -1.4%. Overall the total returns for offices, retail and the industrial sector were -5.3%, -5.2% and -4.8%, respectively.