The UK commercial property market suffered its traditional dip in July with a total return of 1.3%.

According to the latest Investment Property Databank monthly index, property was the second-best performing asset class in July ahead of bonds at 1.1% but

behind equities at 1.3%. However, property returns remain ahead of both equities and gilts in the year to date and over the last 12 months.

Although returns dropped from 2.1% in June to 1.3%, this level still represents the second highest July total return in the last 16 years. The income return remained at 0.4% but the rate of capital growth halved to 0.9%. Rising rents were once again complimented by falling yields, with the all-property equivalent yield falling a further five basis points.

‘It is far too early to call a turning point in the performance of the UK property market as returns in are traditionally weaker than those in June,’ said IPD research manager Dominic Smith. ‘We are however seeing a rebalancing of performance away from purely investor-led returns towards occupier-led returns.’

July saw no change in the ranking of the three sectors as offices lead for the fourth consecutive month, followed by industrial and then retail. Returns from offices and industrials, at 1.6% and 1.5% respectively, were comfortably ahead of those of retail at 1.1%. Office yields fell the most in each of the first six months of 2006, but in July industrial equivalent yields were the best, seeing a seven basis point fall.

Offices continued to deliver the highest rental value growth in line with June at 0.5% Retail and industrial rental value growth slowed to 0.2% and 0.1% respectively.