Retail yield compression surprises in March

The latest monthly MSCI figures indicate that commercial property is holding up well. Rental growth rose further in March, while annual total returns matched July 2010 levels, which were the highest since Q3 1994. Industrial continues to be the driving force, but retail is also delivering a handy contribution. But we expect the current pace of growth will cool down as structural change weighs on occupier demand and yields stabilise. We therefore expect annual total returns to slow to 8-9% by end-2022.