UK commercial property returns fell to 2.2% last year, dragged down by plummeting retail capital values.
This is the lowest level on record since 2012, according to CBRE.
The 2.2% figure includes income returns of 5.5% and capital growth of -3.2%.
Total returns reached 6.3% in 2018.
The industry was hit by retail capital values falling to -12%, while the retail sector’s total return slipped to 6.2% and rental values fell by 4.5% over the year. This marks a further decline on 2018, when these figures stood at 7.4% and 1.8% respectively.
Overall sector performance was pulled down by capital value falls for shopping centres, which again dragged the sector down, with a drop in values of -3.1% in December, the worst monthly performance since April 2009.
Toby Radcliffe, analyst at CBRE UK, said: “At the all UK property level, total returns were 2.2% in 2019. This is the lowest total return reported by the CBRE Monthly Index since 2012, but this is in line with what the market expected at the start of the year, when the IPF consensus forecast was 1.8%.
“The year has been characterised by a decline in retail capital values. While no sub-sector has escaped these difficulties, shopping centres have been particularly challenging. In contrast, industrials and offices have performed robustly throughout the year, with industrials finally emerging on top as the year’s best-performing sector, and rest of UK offices as the best sub-sector.
“Investors expect a wide divergence in performance to persist into 2020, meaning macro and asset-level allocation decisions will be crucial in determining portfolio performance.”
In 2019, capital value growth for industrials was 2.5% and the sector’s total return was 7.6%, making it the strongest-performing sector of 2019.
Moreover, 2019 has also seen a significant deceleration of industrials’ growth when compared with 2018, when values rose by 12.4% and the sector’s total return came in at 18.1%
Capital values in the office sector rose by 2.1% last year, while the total return reached 6.9%.
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