Q3 capital growth in UK is shallowest of the year, delegates told

Modest rental uplifts over the third quarter failed to prevent the shallowest quarterly capital growth of the year, delegates at the IPD/IPF/PDIG Quarterly Q3 Briefing were told on Tuesday.

According to the IPD Quarterly Index, UK commercial property delivered a fifth-consecutive quarter of rising capital values, at 0.7%, which, together with a 1.5% income return, delivered a 2.3% total return. The cumulative rebound in property prices now stands at 17.4%.

At the morning briefing - held at Herbert Smith's headquarters in central London - Phil Tily UK, managing director at IPD told delegates that while there were positive returns across all segments there was a noticeable divergence in fortunes across different parts of the market. 'The property rebound appears to have now run its course - with all key set of growth measures now trending to zero.'

Rental value growth finally crossed into positive territory, at 0.1%, brining to a close a nine-quarter stretch during which rental values fell by just over 10%.

Tily added: 'We have reached a point of inflection - everyone is trying to second guess what’s ahead: is it teetering on the brink of decline or is the market well positioned to be able to respond to any improvement in the underlying economy?'

'Surveys suggest a degree of confidence among investors in the performance of their own portfolios - arguably reflecting the fact that strong asset management will still be able to yield results even in the face of somewhat fragile market fundamentals.'

Most markets have seen rental improvement, led by central London where offices in particularly delivered a 1.2% rental value growth, which Tily says was 'buoyed along by an upsurge in demand, and the fact that supply, particularly at the prime end remains very tight'.

He added: 'London is clearly running way ahead of the rest of the country.'