UK commercial property values grew for the first time in 18 months in May, as sentiment and occupier demand continued to improve.
UK commercial property values grew for the first time in 18 months in May, as sentiment and occupier demand continued to improve.
According to the IPD UK Monthly Property Index, the fractional capital growth of just 0.01% came from improvements in the office and industrial sectors, with the industrial sector recording growth for the first time in two years. The retail sector continued to act as a drag, but falls were at their lowest since late 2011.
The results come alongside various reports of improving economic conditions in the UK, with construction figures up, service sector growth strong, and household spending and solvency improving.
Total returns for May rose to 0.6%, driven by income returns of 0.6%. Bonds returned -2.3% over the same period, and equities 2.8% (JP Morgan UK 7-10 yr, MSCI UK).
UK property values started to decline for the second time in November 2011 as domestic demand relapsed around austerity cuts and wider macro-economic concerns battered investor confidence. In the intervening 18 months, property values declined by a total of 4.9%.
When added to the 2007/9 falls, this means that UK property, on average, remains over 37% below its pre-financial crisis peak.
Compared with the property crashes of the 1970s and late 1980s, this is the deepest property recession on record, and the slowest recovery. In both earlier crashes, within six years values had recovered to around 20% of their pre crash levels.
