Recovery continues to soften – IPD
IPD says the recovery in commercial property has continued to soften. Figures for the group’s May UK Monthly Index out this week show that UK commercial property capital growth eased for the second consecutive month, at 0.5%, reflecting a moderation in yields and rental decline.
Rents fell by seven basis points in May, the shallowest monthly decline since August 2008, but were down 10.7% in total, compounded over an unbroken 25-month period, IPD said.
IPD says the pace of yield compression in the UK commercial property markets has reached its fastest annual rate for 16 years. The last time that equivalent yields – which have now compressed for a full year, from 9.3% in June 2009 to 7.6% in May 2010 – fell by 170bp over 12 months was at the end of the last property recession in mid-1994, IPD points out.
Malcolm Hunt, head of UK client services at IPD, said: “If the downward revision of the UK economic growth forecast by the Office for Budget Responsibility proves accurate, there will be implications for property fundamentals. Historically, property markets suffer when economies falter, affecting occupier markets and rental growth which, in turn, influence property values.”
