According to research conducted by IPD the total return of the UK office sector property faired worst out of all commercial sectors reviewed in May, falling by 0.9%.

The UK Monthly Property Index (MPI) records commercial real estate property performance both in total and by sector. Performance is measured by total return of a property which is found by adding income return growth to that of yield and rental value. The all property total return for May (-0.7%) had fallen slightly against the April figure (-0.5%), but was still much higher than December’s low point (-3.7%). On an annual basis the total return hit a record low in May 2008 (-13%).By sector, industrial performed best (-0.5%) followed by retail (-0.7%) and finally office (-0.9%).

The MPI also breaks performance down by its components. Yield growth for all properties remained unchanged in May (-1.1%) as did income return (0.5%) and rental growth fell (-0.04%), the first time it has been negative since January 2004. When broken down by sector, industrial and retail saw no change in their yield growth (-1.1), whereas the office sector experienced a further fall (-1.3%) from April (-1%). Retail also remained the only sector to retain a positive rental growth while there were falls for both industrial (-0.1%) and office (-0.2%).

Malcolm Frodsham, research director at IPD, said: “After eleven months of falling capital values, May 2008 also registered a very small fall in rental values and this is the first month that the yield and rent drivers of capital value growth have been pushing in the same downward direction”.