UK commercial property delivered a total return of 8.1% in 2011, after failing to sustain the previous year’s rate of recovery.
The total was down from 14.5% in 2010, although last year’s performance was the second strongest since the market crashed in 2007, according to the IPD monthly index.
While income returns of 6.8% were only marginally down from the previous year, growth in property values slowed from 6.9% in 2010 to 1.2% in 2011.
In December, values fell for a second consecutive month – by 0.1% – as the euro situation worsened and the threat of recession increased.
The value of City offices fell last month for the first time in more than two years, drifting down by 0.1%, as a flood of assets were put up for sale.
Before last November, offices in the Square Mile had regained almost 35% of their value after they were halved during the recession.
Retail values fell by 0.2% in December on the back of the poor occupier market. However, shopping centres in London and the South generated 0.4% growth over the month.
Phil Tily, IPD’s managing director for the UK and Ireland, said: “The year 2012 may be one of re-evaluation in regards to pricing levels and heavy concentration on income.”
bridget.oconnell@estatesgazette.com
