THE PEAK-TO-TROUGH decline in UK commercial property now stands at -41.4 per cent with no immediate sign of the market bottoming out.

The latest Investment Property Databank (IPD) monthly index showed that capital depreciation ended the first quarter at a pace that is consistent with declines that were seen in the first two months of 2009, at -3.1 per cent in March.

Irish investors, who have been major players in the UK market over the past decade and more, have been sitting tight for several months because of the continuing decline in values and difficulties in raising debt finance.

The compounded capital movement over the first quarter was thus -8.9 per cent, according to the index which, while a significant attenuation from the decline in the final three months of 2008 (-15 per cent), is still much steeper than the decline over the same three month period last year, at -4.7 per cent.

Retail, office and industrial capital growth rates in March were -3.4, -3.2 and -2.4 per cent, respectively.

All property initial yields, which have risen every month since June 2007, increased by a further 24 basis points to 7.66 per cent, with yields moving out across all sectors.

The main driver of movement in capital values is changing. While yields are continuing to rise, the downward pressure on rental values is becoming an increasingly significant contributor to capital depreciation.

All property rental value growth in March was -1.34 per cent, which implies a more rapid correction in expected future cash flows from commercial property than at any time in the IPD monthly index’s 22-year history.