With the recovery in economic activity already underway and further easing in virus restrictions to come, the outlook for occupier demand is encouraging. However, with structural factors also at play, this is likely to provide more support to demand for industrial assets, while the rental recovery in the office and retail sectors will lag. These divergent rental prospects mean we think there is more scope for yields falls in the industrial sector than for offices. And, despite looking relatively better value at current pricing, we think retail yields will rise further. With monetary policy forecast to remain accommodative over the next five years, we don’t expect broad-based increases in property yields until at least 2025. The exception is Norway, where rising interest rates and bond yields are set to put upward pressure on property yields from 2023. The upshot is that we think all-property returns will be weak compared to recent years, but industrial will outperform across the board.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services