UK commercial real estate investment returns continued to fall at the start of this year, but not by as much as they were late last year.

Data on UK investment returns compiled by MSCI showed that in January 2023 capital growth was massively negative, down 0.66% on the previous month, annualised at -15.5%.

While it was the seventh successive month of negative returns, the pace of collapse has slowed from -6.5% in October 2022 to a modest -0.2% in January 2023.

However, the UK property market isn’t out of the woods yet, other data indicated. This week Oxford Economics flagged the risk that central bank overtightening in an uncertain environment causes financial market instability. Today UK inflation slowed from a year-on-year 10.5% to 10.1% — but this is still a 40-year high.

The MSCI figures combine the change in valuations for properties plus their income return, for a portfolio of 1,593 properties valued at £29.9B.

"The difference in performance by sector, which has been a defining feature of the market since the pandemic, has narrowed to its lowest level since February 2022," Leahy said. Residential provided the best monthly return at 0.64% and industrial and office were the worst at -0.39%.