Rate of All-Property negative returns slows in UK

All-Property total returns continue to slide in Britain but the rate appears to be slowing, according to the latest Jones Lang LaSalle Quarterly UK Property Index.

The index recorded a return of -4.9% in the first three months of the year, but JLL said that in light of the sharp price correction in the UK market, the rate of decline had slowed compared to the previous quarter. The property adviser noted that capital values fell by 6.3% in the first quarter of 2008 compared to 9.8% in the last quarter of 2007. This resulted in a fall in values during the 12 months to March 2008 of 16.6%.

All three sectors recorded negative total returns in the first quarter. But the office sector where the price correction has been most acute recorded the lowest return of - 5.3%. JLL said prime office yields moved out significantly in March by 30 basis points to 5.62%. The correction was particularly marked in the Greater London and regional city markets. Both markets have recorded 50 basis points rises in yields over the first quarter of 2008 to 6.25% and 6.00% respectively. The retail and the industrial sectors recorded total returns of -4.9% and -4.5% respectively in the first quarter of this year, compared to -9.2% and -7.9% in Q4 2007.

JLL said that despite the fall in returns all property fared better than equities, which recorded returns of -9.9% over the first quarter of 2008, following the turmoil that has hit the global financial markets, including the UK.

Jeremy Handley, a director in Valuation Advisory at JLL said: 'We have already witnessed and continue to record a significant correction in pricing across all three major sectors and across growth and value properties. There is a chance that values may fall still further, given the turmoil in global credit markets. It will take a return to a new level of normality within these markets before the pricing of property relative to other asset classes can be accurately assessed'.