Falling capital values to dent total returns

Events in the euro-zone will act as a drag on property markets throughout Europe. As a result, most non-euro-zone commercial property markets will suffer some renewed falls in capital values this year, as growth drops below the rates needed to sustain occupier demand and thus rental values. Yields will also come under upwards pressure, but any increases are likely to be moderate.  Emerging market returns will appear favourable thanks to the comparatively high level of yields, but those returns will look less favourable when risk-adjusted. Among developed markets, the UK and Sweden will fare best.