UK commercial property values fall after Brexit vote

UK commercial property values fell 2.8% in July, the greatest fall since March 2009, according to the latest IPD UK Monthly Property Index.

Capital value declines were particularly pronounced in the office sector in central London, where values decreased by 3.6%, MSCI said.

The index, which measures the performance of 3,341 property investments worth £47bn, saw an average total return of -2.4% last month, falling from 0.2% in June.

Income return in the index remained broadly unchanged at 0.4%.

However, market rental values switched to negative growth, albeit minor at -0.1% for the month of July, suggesting incomes may come under pressure in the medium-term if further declines are recorded.

“The market is formally in recession post-Brexit referendum as weak investor sentiment hits yield pricing,” said Colm Lauder, MSCI vice president.

“The UK market, especially in London, had been keenly priced in the run up to last month’s vote, with yields in the British capital city at historic lows and income returns amongst the least competitive in Europe. The record pricing in the real estate market could leave little room to buffer economic or political shocks, like Brexit, with values potentially falling further as occupier sentiment weakens,” Lauder said.

ABOUT THE AUTHOR
Alicia Villegas
Alicia Villegas speaks Spanish and Italian and is Iberia Correspondent for InvestmentEurope. She was shortlisted for the Rising Star Award at the British Media Awards 2017 and Writer of the Year at the PPA Independent Publisher Awards 2016. Previously, she worked for almost three years at the seafood business website Undercurrent News as a market reporter. In Spain, she also worked for more than five years for several media outlets.

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