According to the latest Jones Lang LaSalle’s UK Property Index, annual commercial total property returns were at its lowest figure since the index began in 1978 of -15.1%, as total returns continued to suffer in Q2 2008 with returns of -1.3%.

This was due to the rapid correction in pricing over the last 12 months with all property income yields increasing to 6.06%. Combined with the slowdown in rental growth, capital values fell -19.7% over the same period. The latest IPD Monthly Index to June 2008 recorded a similar fall of -19.3% in capital values.

Jeremy Handley, a director in valuation advisory at Jones Lang LaSalle, said: “Following similar negative returns last quarter, the Style Index showed a divergence in returns between growth and value stocks over this quarter which reflects a bigger fall in capital values in value, or secondary assets. Over the 12 months to June 2008 value of properties recorded a -21.5% fall in capital values compared to -18.6% in growth properties. We anticipate the yield gap between prime and secondary stocks to continue to widen over the coming months reflecting the re-rating of value stock particularly given the risks amplified by a slowing economy.”