UK commercial property values dip into red - IPD

UK commercial property recorded a slight capital decline in November for the first time in 28 months, according to the IPD UK Monthly Index.

Total return, at 0.5%, was entirely driven by income return. The negative capital growth, signalling the end of the UK property recovery, was driven by declines in the retail sector, at -0.1%.

'Poor economic growth forecasts, the ongoing eurozone crisis, high unemployment and inflation still hovering around 5% has left consumers and businesses, occupiers and owners alike feeling out of pocket. Deep uncertainty about the potential of the UK to avoid recession next year is now finding its way into property values,' said Malcolm Hunt, IPD UK and Ireland Client Services director.

The recovery in UK property values saw 27 months of growth amounting to 17.8%. This followed falls of 44.1% between June 2007 and June 2009.

A combination of steadily declining occupier demand outside of London and fading investor sentiment has largely driven the declines in retail values. London is still seeing positive capital growth, but this is now being outweighed by poor regional performance. Standard retail in the rest of the UK recorded negative capital growth of -0.4%.

Shopping centres inside and outside of London saw falls in value of -0.4% and -0.5% respectively. UK offices, still the only sector to see positive capital growth, at 0.1%, have nevertheless seen a tailing off in City Offices value change, now down to 0.1%.