IPD has announced in its 2007 UK Annual Property Index that capital value of investments in UK commercial property fell by -7.7% and the total return to property investments was -3.4%, the biggest fall in the index since 1990.

The company reported that the turnaround was driven by a sudden collapse in investor confidence after the summer and triggered by pervasive financial sector uncertainty. The underlying income stream to property actually grew strongly, with rental values rising in all sectors and up 4.6% year-on-year overall.

Rental values grew particularly strongly for West End offices, rising 18.6%. Malcolm Frodsham, research director at IPD, commented that: “The 2007 results have to be put into the context of a very strong run of returns to commercial property, indeed total investor returns remain over 10% p.a. on a three, five, ten and twenty year basis. All eyes should now be focused on the occupier markets: a weak economy will feed through to weaker rental growth but any strong economic news should bring buyers back into the sector.”