U.K. Commercial Real Estate Returns Drop By Record

U.K. Commercial Real Estate Returns Drop By Record

U.K. commercial real estate returns fell by a record amount last month as higher interest rates and a drop in bank lending pushed prices down, according to Investment Property Databank Ltd., a London-based research firm.

The total return on investments, after taking rental income and growth into account, slumped 3.6 percent in November. That’s twice the size of the last record decline, a 1.8 percent fall in returns in May 1990, IPD said in an e-mailed statement today. The value of shops, offices and warehouses plunged 4 percent in November after a 1.9 percent decline in October.

Four straight monthly falls in property returns have cost investors 1.8 percent of their money this year. Commercial property is set to break its streak of being the only U.K. asset to have made money for investors every year since 1992 as appraisers mark down prices in the wake of the credit squeeze.

“This is a price correction rather than a significant prolonged downturn,” Andrew Jackson, property investment director at Standard Life Plc’s fund unit in Edinburgh said in an interview. The unit oversees 15 billion pounds of real estate assets.