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LONDON-Commercial property values across the UK have fallen by an average 2% over the 12 months to June 2001, according to the latest Insignia Richard Ellis monthly index. This is the steepest dtp since August 1996, reflecting a continued softening in market yields.

Retail continues to be the worst-performing property sector, with values down 7.1% on the year. However, the worst could be over for retail investors as the rate of decline actually improved since may 2001, when a year-on-year fall of 7.5% was registered.

Office capital values fell during June although values are still 2% higher than they were the previous year. And capital growth for industrials slowed to 1.5% year-on-year.

The decline in capital values is due primarily to yield movements, and annual rental growth for all property actually rose over the past month to 5.9% per annum. Office rental growth rose to 12.4% and industrials to 3.8% per annum. Growth in high street retail slowed to 1.8% per annum while out-of-town retail growth remained static at 1.5% per annum.

Combining the two, total returns on all property fell back to 5.2% in June from 5.4% in May. Total returns on offices fell to 9.6%, the lowest figure seen since January 1997. Industrial returns slowed to 9.4% and high street retail total returns in the year to June were -0.7%.

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