Retail property values move sharply lower

Investment and occupier demand plunged further in Q2. As expected, the retail sector bore the brunt of the impact, with capital values falling by almost 9% y/y. This drove down all-property capital value growth to just 3% y/y, the lowest since 2012 Q4. (See Chart 1.) However, the impact on property values outside of retail was more modest. That said, with the rebound phase of the recovery coming to an end, we expect occupiers to continue to adjust their requirements to lower levels of activity and the still-uncertain outlook. We think that this will result in more significant declines in rents and rises in yields across all sectors and many markets in H2.