IPD’s UK Monthly Property Index (MPI) found that total returns for all types of commercial property fell in June by -1.5% which is more than twice the fall experienced in May (-0.7%).
June’s fall of -1.5% was still much lower than that experienced in December 2007 when total returns fell by -3.7%. Annual total returns also hit an all time low in June by falling to -14.9% compared to Mays figure of -13%. Capital growth continued its decline in June (-2%) from May (-1.2%) which, according to IPD, is the quickest rate of re-pricing since January. Rental growth for all property remained slightly in negative territory (-0.04%) for the second consecutive month, implying that rents are relatively static.

By sector, retail fared worst in June although all sectors suffered a downturn. Retail (-1.9%) overtook offices (-1.3%) in declining total returns with the industrial sector (-0.69%) continuing to outperform other segments.

Nick Nabarro, senior manager at IPD, told PIN: “The increased pressure on returns reflects investors’ desire for more substantial yields in such volatile times. On top of this the rental returns are relatively static proving that landlords are having difficulty increasing rents.”