Pandemic widens sectoral divergences

Despite the sharp hit to economic activity, euro-zone prime commercial property values were comparatively unscathed last year, falling by just 2%. However, this hides large differences in performance across the sectors. Indeed, industrial property values grew by 11%, while retail values fell by almost 20%. Looking to 2021, we expect property values will be under downward pressure in the near term as tight virus containment measures weigh on economic activity. But if we are right that the vaccine rollout allows economies to rebound in H2, values should improve thereafter. That said, we think that structural headwinds will hold back the recovery in the retail and office sectors. On balance, we think that euro-zone capital value growth will stabilise by year end.