Pockets of sunshine amid the gloom
Commercial property values in the UK in May suffered their steepest monthly drop since values began to decline in November 2011, says the IPD. The institute’s latest Monthly Property Index shows that values fell 0.5% last month – the seventh consecutive monthly decline – and total returns slid to zero as income return (steady at 0.5%) was no longer sufficient to offset negative capital movements.
The IPD says that confidence in the UK property sector was affected by worries about the Greek elections, but was actually helped by the lower volatility of property as an asset class compared with the equity market.
Managing director of IPD UK and Ireland Phil Tily said that while the total return, at its lowest since June 2009, was “bleak reading for an industry still struggling with re-financing,” it was not all doom and gloom as values for City office property and office space in the West End grew by 0.9% and 0.3% respectively in May, and values for retail property in Central London rose by 0.9%.
“The fact that London can continue to grow, even in such difficult times, lends cheer to an otherwise challenged marketplace,” he added.
By sector, retail property values overall fell 0.7% with values for shopping centres particularly badly affected, falling 1.2% in London and the South East and down 1.3% in the rest of the UK. Offices values were down 0.3% and values for industrial units also fell 0.3%.
