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According to the latest Jones Lang LaSalle Quarterly Property Index, all-property total returns recorded the smallest negative quarterly returns since June 2008 at -1.8%. This translated into annual total returns of -22.9%. Capital values fell by 3.7% in Q2 2009 compared to -8.2% in the previous quarter, driven principally by the 3.1% decline in rents. Over the last twelve months to June all property capital values fell by 28.2%.
In terms of performance of individual assets, nearly 15% of all the properties in the Index recorded a rise in capital values and almost 25% saw no change, over the quarter. The majority of those properties were located in London and the South East.
Rental decline intensified across all three major sectors over this quarter with the Office sector recording the biggest fall at -4.8%, followed by the Retail sector at -2.1% and Industrial at -1.2%. This translated into year-to-date rental decline of 12.2% for Office, -3.7% for Retail and -3.0% for Industrial. Capital values, mainly driven by rental decline reached -5.5% for offices, -2.8% for Industrial and -2.5% for Retail. Total returns for the individual sectors (Office, Retail and Industrial) were -3.6%, -0.6% and -0.8% respectively over Q2 2009.
The Jones Lang LaSalle “Style Index” showed increasing discrepancy in investment performance between prime and secondary assets. Secondary assets (value properties) continued to struggle with total returns of -2.1%, reflecting a fall in capital values of -4.3. Total returns on prime assets (growth properties) were -1.5% with a -3.1% drop in capital values.
Commenting on the latest UK Property Index, Mike Penlington, director in Jones Lang LaSalle’s Valuation Advisory team said: “Whilst at the prime end of the market yields have stabilised and in some areas improved, the outlook for the secondary market remains unclear given the weak occupational market. We anticipate further adjustments in secondary values over the course of this year. Investors may have to look at assets which do not tick all the boxes, given the demand for prime assets.”
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specialising in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.3 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $46 billion of assets under management.
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