In August, stronger rental value growth in the office and industrial sectors meant that annual all-property rental value growth held steady. (See Chart 1.) This is consistent with the recent improvement in economic activity, following the contraction in UK economic growth in Q2. Even so, all-property rental value growth remained feeble and looks set to decline in the near future as retail rental value declines intensify. What’s more, we expect property yields to continue to rise across the board, although how quickly will depend on Brexit. In turn, we expect all-property capital value declines to continue for the next two years or so, squeezing total returns across the board.
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