Capital values and income still in decline

CAPITAL VALUES and income are continuing to decline in the commercial property market, despite the heightening overseas investor interest in distressed properties.

The latest index from commercial agents Jones Lang LaSalle also shows that rental values are still drifting down and will continue to do so as properties in the study move towards the end of leases which carry higher rents.

The index showed that in the three months up to the end of September, capital values fell by 2.4 per cent as against 2.3 per cent in the previous quarter; income was also back by 2.4 per cent, a marginal improvement on the -2.5 per cent between April and June, while rental values were down by 0.5 per cent compared to 1.4 per cent previously.

Hannah Dwyer, research analyst at Jones Lang LaSalle, still managed to hit an upbeat note, saying that despite the falls in capital values and income, the overall income yield of 9.6 per for the whole index portfolio meant that investors still got positive returns on investments.

“The high yield is therefore sustaining any falls in values and is contributing to a positive overall index result of +0.1 per cent in the quarter and +4.5 per cent in the year,” she said.

While capital values slipped in all three commercial property sectors in the last quarter, the greatest fall of 4 per cent was recorded in retail. Offices were down by 1.2 per cent while industrials slipped by 1 per cent. In the previous quarter, retail had been back by 2.9 per cent while industrial fell by 0.5 per cent.

The index also showed that rental values were also down, offices by 1 per cent compared to 1.4 per cent in the previous three months, while retail slipped by 0.1 per cent as against 1.6 per cent in the previous quarter.

Dwyer said that although there were still “decreases” across most indicators, the pace of decline appeared to be slowing with all of this quarter’s year-on-year changes significantly lower than the results a year ago.