Falling rents having greater impact on commercial property values, IPD says

The drop brings the total slide in property values to 8.9% in the first quarter of the year.

The latest IPD Monthly Index shows that the value drop was shallower than in the last quarter of 2008, when values fell by 15%.

However the drop is still much steeper than in the first three months of 2008, when values fell by 4.7%.

Malcolm Frodsham, research director at IPD, said the declining rents were becoming a more significant part of the change in capital values.

‘Tenant’ are seeing downward movement in rents quicker than in previous property recessions because leases have become shorter and more flexible, with greater break clauses.

‘Although, while this momentum in falling rents is a concern for property owners, an implied income return of over 8%, based on annualizing March’s figure, must be whetting the appetite of value and income seeking investors.’

Property values have now fallen, peak to trough, by 41.4%.