UK commercial property returns fell to 2.3% in the first quarter of 2011 as the re-pricing from the downturn continued, according to the IPD UK Quarterly Property Index. The rate of capital growth fell by 50 basis points to 0.8%.

'While in the overall context of the recovery period this is a relatively sedated pace of growth, it nevertheless marks the seventh consecutive quarter of improving values. Values fell 42.2% from June 2007 to June 2009, and have since recovered 19.9%,' said Phil Tily, UK and Ireland managing director at IPD.

He added: 'Re-pricing, as measured by IPD's yield impact, is still the main source of growth, indicating the extent to which returns are principally determined by underlying investor sentiment. It does appear that the recovery period, which began two years ago, was a front loaded affair, with returns having ebbed away in the past nine months. Values are still rising and yields are still falling but at much reduced rates.'

Rental value results remained positive for the third consecutive quarter, up 20 basis points in the last three months, and are now playing their part in the overall performance numbers, IPD said.