IPD: Commercial property capital growth remains positive (UK)
Wednesday 15 December 2010
UK commercial property values appreciated by 0.1% in November, contributing to a compounded 6.6% capital growth over the year to date, as measured by the IPD UK Monthly Index.
Source: IPD UK Monthly Index.
The bulk of this capital appreciation was delivered over the first six months of the year, driven by a 70 basis points equivalent yield compression from last December to June, ending the period at 7.5%. Fractional compression over the past five months has seen a further 10 basis points fall.
The net effect of the 11-month 6.6% capital growth, together with a 6.5% income return, is a total return for the year-to-date of 13.5%. The chart shows the monthly headline indicators.
"Such has been the stability of markets since the early summer that investors can make a reasonably educated guess as to the annual total returns for 2010. Of course uncertainty remains, but less dramatic movements in underlying values will have brought some relief to commercial property investors looking to understand risk in their portfolios," explains Mal Hunt, Head of UK and Ireland Client Services.
Hunt added: "Since the property market recovery first emerged in August 2009, capital values have now rallied 16%, level with December 2008 prices, and over the longer term, prices are level with the start of last decade."
There was little movement in monthly values over November across the sectors, compared to the previous month. Industrials fell marginally for the fourth consecutive month, at -0.1%, while retails and offices appreciated by 0.2% and 0.1%, respectively.
The IPD UK Monthly Index measures 3,649 properties worth £32.9 bln. as at November 2010.