Office rental values suffer slight setback in latest monthly figures

IPD reports end to four consecutive months of overall market rental growth

Article posted: 20 Apr 2011

According to the latest UK Monthly Index from IPD, 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%.

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 for office space in Central London, coupled with further levels of decline elsewhere in the UK 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 went on to say: “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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Posted by Janet