Property demand in the Scandinavian and Swiss markets is expected to hold up this year, as they are more insulated from the negative impacts of the war in Ukraine on economic activity. However, structural shifts will continue to cloud the outlook for offices and retail. And given the outlook for even higher inflation, we now expect interest rates in the region to rise sooner, putting more upward pressure on bond yields. We still think there is scope for property yields to fall in the next couple of years outside of Oslo, where property valuations already look stretched. However, we have brought forward the timing of property yield rises in Stockholm to 2024. Overall, this means property returns are set to reduce, including for the industrial sector where returns are expected to converge with the other sectors after 2022.
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