The worst of the Omicron wave appears to have passed and we expect growth to rebound later this year, albeit weighed down by weak consumer income growth. But persistently high inflation is now set to bring a concerted tightening in Base Rate, which is forecast to rise to 2.0% in 2023. Last year’s property performance exceeded all expectations, but we don’t think it will last. The rental outlook remains fragile outside of industrial, while the scope for further yield reductions is now limited. As a result, capital value and returns performance will be much weaker from this year. Within this, retail warehousing and leisure stand out, while London offices have the poorest returns.
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