Economic slowdown feeding into slower rental growth

Slower growth in both developed and emerging economies has started to filter through into property occupier markets, with office demand generally lower than a year ago and fewer cities registering rental value increases in the retail and industrial sectors in Q2. Indeed, retail rents are falling in Scandinavia, although they remain elevated relative to history. Nevertheless, investment volumes have staged a recovery in Scandinavia and in the core CEE markets. With valuations having improved in light of the lower bond yield environment, we think that office and industrial yields could still fall further, but in the retail sector, the likelihood is that yields have already reached a floor.