08. Februar 2010 
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Largest ever quarterly capital growth in Q4, delegates told
UK commercial property markets ended the final quarter of the decade with the largest ever recorded quarterly capital growth, at 8.1%, delegates at the IPD UK 2009 Results Launch were told Thursday morning.
According to the IPD UK Quarterly Property Index, the return to positive capital growth – a cumulative 9.8% over the second half of 2009 – was sufficient to lift the annual total returns to 3.4%, including a final quarter 10.0% total return.
Counter-intuitive market indicators
At the breakfast briefing – held at Sloane Square’s Cadogan Hall – IPD co-founding director Ian Cullen explained to delegates the nature of the dramatic year of two halves. He said: “When the dust finally settled on the oscillations of last year, what emerged was a picture of rents and yields going in counter-intuitive directions – that is, simultaneously, record breaking positive yield contributions in the context of some of the worst rental decline we have ever seen.”
In the Q&A session which followed Cullen’s market analysis, panellist Duncan Owen, chief executive officer at Invista echoed the irregularity of current market trends. He said: “Rents and yields should not go down at the same time – it is a little bit like defying gravity and when it has happened in previous cycles that I have experienced, it has ended in tears in the subsequent period.”
Over last year, the reversal of yield pressure proved the decisive influence on capital growth. Cullen explained: “It is almost as if property investment has become detached from the real economy, and is instead driven exclusively by highly volatile shifts in capital flows which are immediately reflected in a truly amazing yield reversals; flipping from the decade’s most damaging to most beneficial impact in a matter of months.” See the chart below.
After the unprecedented 9.6% fourth quarter yield contribution, the annual figure for 2009 settled at 2.8%, while rental values fell by 8.1% – the steepest decline in the history of the Quarterly Index.
The office market, yet again, lived up to its billing as the most cyclically-sensitive sector “showing much more positive rental pressure on the upside, driven by scarcity of central London office space in 06 and 07, while suffering downward pressure most acutely in the falling market of 08 and 09,” Cullen told delegates. Rental value growth for all segments, however, remained negative at the year end.
There was considerable variation in annual returns across market segments, but the biggest differences were within the retail sector - from best at +11.5% (Retail Warehouses) to worst at -6.5% (Shopping Centres). This 18 percentage point returns spread between the two segments has been beaten only in 1993.
Global property derivatives: encouraging year end
Following the UK 2009 Results, Cullen delivered the IPD Global Property Derivatives trading volumes for the fourth quarter, as published on Monday February 1st.
According to the IPD UK Quarterly Property Index, the return to positive capital growth – a cumulative 9.8% over the second half of 2009 – was sufficient to lift the annual total returns to 3.4%, including a final quarter 10.0% total return.
Counter-intuitive market indicators
At the breakfast briefing – held at Sloane Square’s Cadogan Hall – IPD co-founding director Ian Cullen explained to delegates the nature of the dramatic year of two halves. He said: “When the dust finally settled on the oscillations of last year, what emerged was a picture of rents and yields going in counter-intuitive directions – that is, simultaneously, record breaking positive yield contributions in the context of some of the worst rental decline we have ever seen.”
In the Q&A session which followed Cullen’s market analysis, panellist Duncan Owen, chief executive officer at Invista echoed the irregularity of current market trends. He said: “Rents and yields should not go down at the same time – it is a little bit like defying gravity and when it has happened in previous cycles that I have experienced, it has ended in tears in the subsequent period.”
Over last year, the reversal of yield pressure proved the decisive influence on capital growth. Cullen explained: “It is almost as if property investment has become detached from the real economy, and is instead driven exclusively by highly volatile shifts in capital flows which are immediately reflected in a truly amazing yield reversals; flipping from the decade’s most damaging to most beneficial impact in a matter of months.” See the chart below.
After the unprecedented 9.6% fourth quarter yield contribution, the annual figure for 2009 settled at 2.8%, while rental values fell by 8.1% – the steepest decline in the history of the Quarterly Index.
The office market, yet again, lived up to its billing as the most cyclically-sensitive sector “showing much more positive rental pressure on the upside, driven by scarcity of central London office space in 06 and 07, while suffering downward pressure most acutely in the falling market of 08 and 09,” Cullen told delegates. Rental value growth for all segments, however, remained negative at the year end.
There was considerable variation in annual returns across market segments, but the biggest differences were within the retail sector - from best at +11.5% (Retail Warehouses) to worst at -6.5% (Shopping Centres). This 18 percentage point returns spread between the two segments has been beaten only in 1993.
Global property derivatives: encouraging year end
Following the UK 2009 Results, Cullen delivered the IPD Global Property Derivatives trading volumes for the fourth quarter, as published on Monday February 1st.
