Euro-zone commercial property still looks pricey relative to equities

The stock market rally has pushed the equity dividend yield down, making euro-zone commercial property look more attractive relative to equities, on one measure at least. However, the spread of the property initial yield over the dividend yield is still below what it was in mid-2007. It is also below the benchmark that we consider broadly consistent with fair value. As such, we think that pressure on euro-zone commercial property yields remains upwards.