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Homeworking to remain key to city retail performance

One of the unforeseen consequences of the homeworking revolution is its negative impact on city centre retail footfall. The evidence suggests that in urban centres there is a link between higher levels of remote work and poorer retail performance, which we think is likely to persist. In view of the wider interest, we are also sending this European Commercial Property Update to clients of our UK Commercial Property Service. Property Drop-In (19th May): What will rising interest rates mean for commercial property returns in the US, UK and Europe? Join our 20-minute briefing on the outlook for returns on Thursday. Register now.
Andrew Burrell Chief Property Economist
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More from European Commercial Property

Non-Euro European Commercial Property Outlook

Scandi & Swiss: Rising interest rates to hit values

The rapid turnaround in the interest rate environment has led us to revise down our expectations for property performance in Scandinavia and Switzerland. Property valuations deteriorated sharply in Q1 and are expected to come under more pressure given further rises in bond yields. We now think property yields will reach their troughs this year and will rise by a cumulative 30bps-35bps over the following few years. With structural changes weighing on the office and retail sectors, rental growth is unlikely to be strong enough to prevent a material slowdown in capital value growth, with falls likely in 2023-24. This will contribute to a sharp drop in returns after this year. Within this, industrial is still expected to perform best, but the margin of outperformance will reduce significantly compared to recent years.

27 June 2022

Euro-zone Commercial Property Outlook

Rising interest rates to speed up property correction

The weaker economic outlook and larger increases in interest rates are expected to weigh on property performance. With valuations under increasing pressure from sharply rising bond yields, we think that property yields will reach their troughs this year and rise by a cumulative 35bps at the all-property level over the following few years. Rental growth is unlikely to be able to provide much offset to prevent falls in capital values in 2023-24, with structural changes dragging on the retail and office sectors. This will leave annual total returns languishing in low single digits on average over the forecast. Beyond 2022, we think retail will overtake industrial as the best performing sector, while offices are expected to underperform.

23 June 2022

European Commercial Property Update

Will property resist the effects of deglobalisation?

A recent MSCI article speculated that real estate investment could buck the deglobalisation trend given distinct features of the asset class, though we are not convinced that will bring many benefits. In view of the wider interest, we are also sending this European Commercial Property Update to clients of our UK & US Commercial Property Services.

14 June 2022

More from Andrew Burrell

European Commercial Property Update

Higher rates to squeeze Copenhagen office values

With economic concerns worsening in the euro-zone, we expect that the Danish economy will not be immune. And we think that the shifts in the interest rate outlook in particular will have the most significant impact on Copenhagen office performance. UK Housing Drop-In (10th May 10:00 BST/17:00 SGT): Economists from our property team are hosting a 20-minute briefing to explain why we think UK house prices are heading for a fall – and how bad the fallout will be. Register now.

5 May 2022

UK Commercial Property Update

There is still likely to be a reckoning for offices

We think the recent upturn in office market performance is largely down to the one-off release of pent-up demand and remain downbeat about future prospects. With occupancy still languishing and remote working firmly established, we think that the risks to office vacancy and rents have not passed yet. In view of the wider interest, we are also sending this UK Commercial Property Update to clients of all our Commercial Property Services.

21 April 2022

US Housing Market Data Response

Existing Home Sales (Feb.)

Existing home sales slipped in February, more than reversing January’s surprise increase. And the Fed’s first move on interest rates this week reinforces our expectation that existing sales will remain soft in the months ahead. Long Run Outlook Drop-In (23 March, 11:00 EDT/15:00 GMT): What will be the lasting impacts of the war in Ukraine? What legacies will the pandemic leave? What does a future of higher inflation mean for economies and markets? Neil Shearing hosts this special discussion with senior economists about the long-term investing outlook on Wednesday. Register here.  

18 March 2022
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