Economies reopening but headwinds remain for property

The easing of virus restrictions has brightened the economic outlook and prospects for occupier markets. And with rises in inflation expected to be temporary, we think monetary policy will remain highly accommodative over the next five years, keeping the environment supportive for property yields. However, the structural headwinds in the retail and office sectors mean that the rental growth prospects are poor outside of industrial. Further, despite looking undervalued, we think that retail yields need to rise further before assets look attractive. As such, we expect only a weak recovery in all-property values over 2021-2025. Within this, industrial will be the standout performer.