With virus restrictions set to be eased further, we expect the recovery in economic activity to gather pace from Q3, which should give occupier markets a lift. But the pick-up will not be enough to prevent falls in office and retail rents this year. And further out, large supply pipelines and structural change will keep rental values in check. Meanwhile, with monetary policy set to normalise earlier than we had initially anticipated, we have now pencilled in sharper property yield rises across all sectors from 2023. As a result, we expect capital values to barely grow over the next five years. In turn, total returns will be dominated by income returns, with industrial outperforming offices and retail, echoing our sectoral rankings for western Europe.
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