UK - UK commercial property capital values fell by record levels last month, according to Investment Property Databank (IPD).
 
The UK Monthly Property Index for October 2008 revealed commercial property prices in the UK experienced negative growth of -4.3%, the largest monthly figure in IPD's 22-year history.

A -0.3% fall in rental growth across all property sectors and a -4.2% yield impact were reported to be the main causes for the steep decline in capital values.
 
Malcolm Frodsham, director of IPD, said: "The pace of capital value falls over October fully confirms market expectations and it remains to be seen, from this point, whether values have fallen to a point where equity investors are prepared to step back into the market in force."
 
The index showed the sector has entered a "double dip" phase, as all-property total returns fell to -3.8% in October, only fractionally more than those recorded for December 2007, which were -3.7%.
 
"The industry is braced for further falls in the remaining two months of 2008 but so rapid have been the falls that it is impossible that the asset price deflation will soon have run its course," said Frodsham.
 
The retail sector delivered the sharpest capital falls at -4.7%, followed by office and industrial sectors at -4.3% and -3.2%, respectively.
 
All sectors experienced negative total returns, but the industrial sector was the least affected, with returns of -2.7%. The retail and office sectors returned -4.2% and -3.7%, respectively.
 
Rental values in the office sector recorded the strongest falls in nearly five years at -0.7%.
 
According to Frodsham, the amount of new money and redemptions from retail and institutional unitised funds in the IPD Pooled Funds Index are the key indicators to watch out for in the industry.

Such is the uncertainty in the market that IPD issued a warning to investors about the vast majority (82%) of valuations on which the index is based.
 
"Users of these figures should be aware that many of the valuations underpinning the returns and capital and rental value movements have been issued with warnings about heightened uncertainty - in accordance with RICS Valuation Standards which allow for such warnings when data may be confused, incomplete or inconsistent as a result of market instability," IPD stated.
 

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