Commercial property values fell by a further -0.3% in February as stagnant regional growth and growing fears of a mild second recession took their toll.
This is the fourth month of falling capital values, following a -0.2% decline in January, as the regions suffered, according to the IPD UK monthly index.
Despite some fears of a bubble in City office prices at the start of the year, demand for prime assets from international investors has helped contribute to successive 0.2% improvements in capital values in both January and February.
These robust growth rates have edged the City ahead of West End and Midtown offices in the performance rankings for the start of this year. Central London retail and office markets remained the strongest parts of the market on a rolling 12-month basis.
Total return for the month was 0.3%.
IPD managing director, Phil Tily, said: “Weakening occupier demand underlies this month’s fall in values, and outside of London this is now having a notable drag on performance results.
“Sluggish regional economic growth, compounded by government austerity measures, contributed to a -0.1% reduction in rental values at the all-property level. Some of the more regional markets saw rental value declines of up to -0.6% in the month.”
Outside of London, there was only one market segment – outer South East industrials – of the 32 the IPD measures monthly, that saw positive capital value growth in February.
Tily added: “Slowly but surely, markets that experienced some recovery since the recession have been dropping back into negative territory as uncertainty, economic inertia and falling levels of personal spending have dampened sentiment.
“The retail sector, which posted snapshots of optimism within sales reports in the immediate aftermath of Christmas, continued to be the worst-hit area of the market, losing 0.4% of its values over the month. Shopping centre values outside of the South East saw the most notable decline of any property type, at -1.6% during February. The overall contraction in the retail sector is being reflected in our performance numbers.”
bridget.oconnell@estatesgazette.com
