Skip to main content

Structural factors to hold back office and retail recovery

Although the near-term economic outlook remains weak, vaccine developments pave the way for a rebound in mid-2021. However, we think that the rental recovery in property markets will be more gradual. This reflects that structural headwinds remain for retail and office property because of the growth of ecommerce and an accelerated adoption of remote working. In contrast, industrial rents will be supported by structural factors and the recovery in economic activity. Meanwhile, although investment has fallen sharply, there has been little sign of a repricing, at least outside of the sectors hit hardest by the virus such as retail. Combined with supportive property valuations, we think that there is scope for all-property yields to edge down over the coming years. As such, following a less steep drop in all-property capital values than previously expected of about 4% y/y in 2020, we now think that values could return to pre-virus levels in 2022.

Become a client to read more

This is premium content that requires an active Capital Economics subscription to view.

Already have an account?

You may already have access to this premium content as part of a paid subscription.

Sign in to read the content in full or get details of how you can access it

Register for free

Sign up for a free account to gain:

  • Unlock additional content
  • Register for Capital Economics events
  • Receive email updates and economist-curated newsletters
  • Request a free trial of our services

Get access