Commercial property returns to capital growth

The UK commercial property market showed capital growth last month for the first time in 26 months, Investment Property Databank (IPD) revealed today.

Its monthly index showed a returned to positive capital growth for UK commercial property in August for the first time since June 2007, with a continued easing in negative rental value growth.

However, the IPD warned that the data was not all favourable. July's fall in vacancy rates was followed by a rise in August to set a new record high for the indicator, which measures vacant rental value as a percentage of total databank income.

Ian Cullen, co-founding director at IPD, said: “The much-anticipated return to capital growth in UK commercial property comes at a time when the finance sector is marking a very painful anniversary - the collapse of Lehman's which sent property and most other investment markets around the world into a tailspin.

“Since that profound shock,” he added, “commercial property has delivered record losses, but has at least traced a relatively stable path towards this first tiny sign of recovery - in stark contrast with the much more violent oscillations of the equity and bond markets.”