year was a result of a smaller decline in capital values; capital growth was -3.2% in the year to March 2021, better than the -4.7% recorded for the previous year. The income return was 4.5%, the same as the preceding year. The industrial sector had a strong year and was the top performing sector for the fifth consecutive year. The industrial total return for the year ending March 2021 was 14.3%, with capital growth at a three-year high at 9.6% and an income return of 4.3%. Industrial ERV growth for the period was 2.8%, with a sub- sector range of 2.2% to 3.8%. Capital growth ranged from 6.1% to 13.0% within sub-sectors. Equivalent yields for industrial property now stand at 5.0% (March 2020: 5.3%). The office sector faced a degree of uncertainty this year, as the success of working from home has provoked thought over future office space requirements for many occupiers. The office sector produced a total return of -0.8% for the year to March 2021, comprising -4.5% capital growth and 3.8% income return. All Office annual rental growth was -1.0% ranging from -2.1% to 1.2% within sub-sectors. Office capital growth was negative across all sub- sectors, ranging from -6.7% to -1.7%. Equivalent yields for office property now stand at 5.8% (March 2020: 5.6%). It was an extraordinarily challenging time for the retail sector, with three national lockdowns resulting in the closure of all non-essential shops for much of the year. Months of lost trading and dramatically reduced footfall due to Covid-19 exacerbated an already tough environment for retailers, which has led to a high number of CVAs and administrations during the year. The retail sector produced a total return of -8.1% for the year to March 2021. This
comprised capital growth of -12.9% and income return of 5.5%. Rental values fell -9.0% over the period and were negative across all sub-sectors, ranging from -20.1% to -1.4%. Retail sub-sector capital growth ranged from -27.4% to 3.6%. Supermarkets were the only retail sub-sector to record positive capital growth. Equivalent yields for retail property now stand at 6.7% (March 2020: 6.4%). According to Property Data, the total investment volume for the year to March 2021 was £41.5 billion, a -28% decrease on the year to March 2020. The volume of investment by overseas investors in the year to March 2021 was £19.5 billion, accounting for 47% of all transactions. When looking at average returns at the All Property level, the year to March 2021 was disappointing but not surprising given the plight some sectors faced during the pandemic. However as always, the devil is in the detail as there was a marked range of returns across sectors. At the March 2021 year end the difference between the highest and lowest performing sectors has never been more polarised. There are risks and heightened uncertainty to navigate but also opportunity and optimism regarding the speed and strength of recovery in the latter half of 2021. Low interest rates and low returns from Government bond yields make investment into well-let commercial property with a secure income stream an attractive proposition.
The annual percentage change in the consumer price index has been at or below 1% since April 2020 and in March 2021 stood at 0.7%. In March 2021 retail sales rose higher than pre-pandemic levels, even before non-essential shops reopened. Online retail reached a record proportion of total retail sales in January 2021 of 36.4%, as consumers were restricted from using physical stores. Of course, whilst some retail sectors have struggled, others have thrived. As people were confined to their local area, businesses still able to trade benefitted from this additional footfall at the expense of retailers situated at transport hubs or in central business districts. Many companies with an established online offering had a strong year. Many households were fortunate to see income levels maintained and outgoings reduced, contributing to a record increase in the household savings ratio, which reached a peak of 25.9% in the second quarter of 2020. As restrictions are eased and retail and leisure businesses reopen, it is expected that this elevated savings ratio will contribute to an economic recovery. The recovery has begun to gather pace. It is anticipated that healthy consumer spending and interest rates staying lower for longer will contribute to a rapid rebound in the second half of 2021. The Office for Budget Responsibility has forecast GDP growth of 4.0% for 2021 and a recovery to pre-pandemic levels by mid-2022. UK propertymarket According to the MSCI UK Quarterly Property Index, commercial property delivered a total return of 1.2% for the year ended March 2021, which compares to -0.4% for the year ending March 2020. The increase on last
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