The Investment Property Databank quarterly index showed a negative total return for the first time since it started in December 2000.

Figures released today showed quarterly total returns of -1.1%. Year-to-date total returns now stand at 3.5%.

The IPD Quarterly Index draws its data from 8,003 properties with a capital value of £176bn, more than twice as much as the monthly index and roughly two-thirds of the annual index.

Positive West End

Capital value growth dropped to -2.2%, while income returns held steady at 1.1%. Retail was the worst performing sector with a total return of -1.8%, with industrial property returning -1.6% and offices -0.2%. West End offices was the only subsector to provide a positive return, 2% across the quarter.

IPD Research Director Malcolm Frodsham said: ‘The fall in commercial property values in the third quarter has wiped out the capital gains made in the first two quarters of this year.

Prices in the balance

The immediate prospect for prices is in the balance. Net investment may turn strongly negative and force prices down and rental trends could also weaken significantly in response to the credit crisis.

‘However, the net investment in the third quarter was still positive overall on the IPD Quarterly Index and City office rental growth actually accelerated.

The outlook for commercial property prices is therefore very uncertain for the rest of the year.’