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U.K. Commercial Real Estate Falls in May for Seventh Month

June 18 (Bloomberg) -- U.K. commercial real estate values fell for the seventh straight month in May as Britain’s economy weakened, Investment Property Databank Ltd. said.

The average value of stores, offices and warehouses declined 0.5 percent from April, led by retail properties, IPD said in a statement today. Total return, which combines the change in real-estate values and rental income, was zero for May, compared with 0.2 percent in April.

“Total return has fallen to its lowest level since June 2009, which is bleak reading for an industry still struggling with refinancing,” Phil Tily, a managing director at London-based IPD, said in the statement. Total return over the 12 months through May was 5.4 percent.

The worsening sovereign-debt crisis in Europe is casting a “long shadow” over Britain’s economy, Bank of England Governor Mervyn King said last week. The slowdown has caused shops to close and business owners to defer decisions on leasing office buildings and warehouses, adversely affecting returns for investors.

The value of office properties leased to companies in the City of London financial district rose 0.9 percent and West End properties in the U.K. capital rose 0.3 percent in May.

“The fact that London can continue to grow, even in such difficult times, lends cheer to an otherwise challenged marketplace,” Tily said.

The IPD index was compiled from appraisals of 3,602 properties worth 33.4 billion pounds ($52 billion) at the end of May.

To contact the reporter on this story: Neil Callanan in London at ncallanan@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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