UK commercial property returns and capital values declined during July, according to the latest IPD UK Monthly Property Index.

The data shows that the average total return was -2.4% last month, falling from 0.2% in June. 

Capital values depreciated by 2.8% in July, the second monthly decline recorded by the index after a 0.3% dip in June.

MSCI, which releases the IPD Index, reports that the decline in capital values witnessed last month – the first month since the UK voted to leave the European Union – is the greatest recorded since March 2009 when values plummeted by over 3%.

The office market in Central London was the worst hit in July, with average values dropping by 3.6%.

Other notable findings from the index include income returns remaining broadly the same at 0.4% and rental values switching to negative growth, albeit at the minor rate of -0.1%.

MCSI predicts that incomes may come under pressure in the medium-term if further declines are recorded.

“The July decline, coupled with the decline in June, indicates that the market is formally in recession post-Brexit referendum as weak investor sentiment hits yield pricing,” says Colm Lauder, vice president of MSCI.

“The UK market, especially in London, had been keenly priced in the run up to [June’s] vote, with yields in the capital at historic lows and income returns amongst the least competitive in Europe.”

“The record pricing in the real estate market could leave little room to buffer economic or political shocks, like Brexit, with values potentially falling further as occupier sentiment weakens,” he adds.