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Capital growth limited by falling rents, says IPD

Britain’s commercial property markets delivered the largest monthly capital growth since June 2006, at 1.1%, according to the IPD UK Monthly Index. This increased pace of market acceleration brings third quarter growth to 1.2%.

While the monthly capital growth figure is the largest in more than three years, it was contained by continued falling rents.
Yield impact, which measures the influence yield movements have on capital values, was 1.75% – the strongest positive figure since December 2005, and but for downward rental pressure would have been translated fully into capital growth.

However, the pace of falling rental levels picked up again in September, to -0.64%, after easing on a monthly basis in August.

All three sectors delivered positive capital growth for the first time since May 2007, led by Retail 1.4%, followed by Industrials at 1.1%, while Offices returned its first positive capital growth since July 2007 with 0.8%.

All property initial yields compressed for the fourth month to 7.7%. The 12-month change in capital values has fallen to -25.3%, falling from a record high of -31.5% for the year to May 2009.

Over September, income returns held steady, at 0.7% contributing to a monthly total return of 1.8%. Vacancy rates over the month, which measures vacancies as a percentage of total databank rental values, stood at 11.1%.

For more information and all PR and media queries, please contact Andrew Teacher, Head of Media, on ateacher@bpf.org.uk.