Having steadily and continually risen since August 2009, capital values appear to have peaked. Indeed, values have now fallen, albeit only marginally, for the last three months, reflecting a combination of flat or negative rental growth and small increases in yields. As a result, total returns are decelerating sharply and are now largely being driven by the income return. Over the year as a whole, the office sector recorded the strongest performance of the three main sectors, driven by the buoyancy of the London markets. However, in line with more general UK market trends, total returns in the London office segments began to decelerate sharply in the second half of the year. As a result, the industrial sector, boosted by
a higher income return, took over as the top-performing sector in the final quarter of 2011.
Source : M&G Real Estate