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Monthly index puts commercial property at worse than 1990 recession

All Property total returns are now at 18.2% over the 11 months to November 2008, compared to an inflation-adjusted return of -16.2% almost 18 years ago on the UK Annual Index.

This compares with the largest ever annual total returns loss for UK commercial property, on a real return basis, of -29.4% recorded back in 1974.

For the second month in a row total returns and capital values for UK commercial property have broken records for the largest monthly falls with returns of -5.1% and -5.7% respectively, according to the November IPD UK monthly index.

Over the year to date all property capital values have fallen by -22.6 % and over the last 16 months by -31.51%. This compares with capital value falls of -27% between November and May 1992.

Yield impact and rental value growth are the prime drivers of capital movement and they remained in negative territory during November which explains the dramatic falls in capital values.

Yield impact was -5.3% month on month for all UK property and the market saw a weakening of rental values of -0.5% month on month. Offices overtook retail as the steepest faller with capital value decreases of -5.9% and -5.7% respectively.

Since April rents have fallen faster in offices than industrial or retail at a rate not seen since July 1993, at -1.4%. Overall the total returns for office, retail and the industrial sector were -5.3%, -5.2% and -4.8%.

Ian Cullen, IPD co-founding Director, said: 'With an 11-month nominal return to November of -18.2%, we are precariously close to the worst 12-month real return on record, that was 1974 at -29.4%.'