Scandi & Swiss: Returns to converge further ahead

The economic recovery and strong investor demand are supporting the property market upturn in Scandinavia and Switzerland. However, we expect 2021 to mark the peak for returns in most markets, except for Oslo where the start of the monetary tightening cycle in September means that this peak was likely last year. This reflects our view that structural shifts will weigh on rental value prospects for offices and retail. And while the rental outlook for industrial is brighter, we think stretched valuations will limit the scope for further yield falls beyond 2022. This will also contribute to a convergence in sector prospects in the latter half of the forecast period. As industrial capital value growth slows, we expect a pick-up in retail values, prompted by the improved outlook and supportive valuations. This will allow retail to edge ahead of industrial to the top of the returns table from 2023.