Commercial property values plummet 41%

Commercial property values have now fallen by 41% since their peak in 2007, according to the latest data from IPD.

Values fell 3.1% in March according to the property data company, in line with an overall fall of 8.9% over the first quarter of the year. Retail was the worst performing sector, falling 3.4% in value in the last month, with industrial the best performing sector, down just 2.4%.

IPD said prices were being driven down by falling expectations of future rental incomes, with March rents falling 1.34% - a faster decline that at any point in the IPD index's 22-year history. IPD pointed out that because of the even faster fall in capital value of buildings, yields are still growing.

Malcolm Frodsham, research director at IPD said: “Tenants are seeing downward movement in rents quicker than in previous property recessions because leases have become shorter and more flexible, with greater break clauses. Although, while this momentum in falling rents is a concern for property owners, an implied income return of over 8%, based on annualising March's figure, must be whetting the appetite of value and income seeking investors.”