Commercial rental values stall

Monday 18th April 2011
Four consecutive months of overall market rental growth came to an end in March, albeit fractionally, despite all property reporting a modest upturn in capital growth, at 0.3% according to the IPD UK Monthly Index.

All property rents fell to -0.1%, and within these results Office rents turned negative for the first time in four months due to a combination of lower growth in Central London, coupled with further levels of decline elsewhere in the office market.

Modest levels of capital growth across all sectors in March, amounting to 0.3%, 19 basis points higher than in February, were therefore entirely driven by yield movements, with yield impact at 0.4% for March.

Phil Tily, Managing Director for UK & Ireland, said: "Results are again showing mixed signals, with slightly improving capital growth entirely dependent on investor sentiment, while positions for rental values have weakened."

On a quarterly basis, capital growth increased marginally during the first three months of the year, by 0.6%, just ten basis points more than the 0.5% recorded in Q4 2010. Rental values remained unchanged over the quarterly period, with growth again entirely dependent on yield adjustments.

Tily said: "The modest increase in capital values in March led to a 2.3% total return for Q1, just a ten basis point increase on the 2.2% we saw in Q4."

Since capital growth turned positive, 20 consecutive months of growth have seen values now recover by 17.0%

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Mike Jones