Total returns from commercial property fell again last month, but the rate of decline continued to slow.

Figures from Investment Property Databank show that commercial property produced a total return of -0.8% in March, compared to -1% in February and 2% in January.

The March drop was made up of a fall in capital values of 1.3% and income return of 0.5%.

The figures show that property outperformed equities in March, which returned -2.1%, but fared worse than the 1.4% return provided by gilts.

Where is the floor?

According to the monthly figures, property provided a return of -3.4% in the first quarter of 2008, compared to -8.2% in the final quarter of 2007.

Malcolm Frodsham, IPD’s Research Director, said: ‘The first quarter of 2008 has not proved to be a re-run of the sharp pricing correction on commercial property witnessed in the final quarter of 2007.

‘Capital values are still falling, but the rate has moderated month-on-month this year and rents continue to grow in all of the three main sectors. The results may not signal the bottom of the market just yet but at least investors have a better idea of where the floor is likely to be.’

Retail and office property both provided a total return of -0.8%, whereas industrial property provided a return of -1%.