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The UK real estate sector stayed in negative territory in the second quarter of 2008. Jones Lang LaSalle's UK Property Index recorded an All-Property total return for the period of -1.3%. This translated into annual total returns of -15.1%, which the property services company said was the lowest annual figure since the index began in 1978.

JLL said the record low was due to the rapid correction in pricing over the last twelve months with all property income yields moving out by nearly 150 basis points to 6.06%. Combined with the slowdown in rental growth, capital values fell 19.7% over the same period. The Investment Property Databank's Monthly Index to June 2008 recorded a similar fall of 19.3% in capital values.

All three sectors recorded negative total returns over the quarter with the office and retail sectors showing similar figures of -1.5%. The industrial sector suffered slightly less with a total return of -0.6%. Within the retail sub-sectors, retail warehousing recorded a stronger decline with a total return of -4.7%, reflecting a drop in capital values of 6.2%.

Jones Lang LaSalle said the yield gap between prime and secondary properties is also widening. The firm's 'Style Index', which compares the performance of high yielding properties with low yielding, showed returns of - 0.8% in growth (low yielding) and of -2.0% in value (high yielding) properties.

Jeremy Handley, a director in valuation advisory at JLL, said: 'Following similar negative returns last quarter, the Style Index shows a divergence in returns between growth and value stocks over this quarter. This reflects a bigger fall in capital values in value, or secondary assets. Over the twelve months to June 2008 value properties recorded a 21.5% fall in capital values compared to 18.6% drop in growth properties. We anticipate the yield gap between prime and secondary stocks to continue to widen over the coming months reflecting the re-rating of value stock particularly given the risks amplified by a slowing economy.'