Resilience of German property yields at odds with the macro outlook

To date, German property yields have proved remarkably resilient to the forces pushing property yields sharply higher in the rest of Europe. But, in our view, German property yields do not reflect the increasingly dire outlook for the economy and the implications for rental values and voids. This suggests that their relative outperformance will not be sustained. Indeed, we think German property yields will see some of the sharpest increases of any European market over the rest of this year.