UK Commercial Property
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Slow and uneven revival to continue

The economic recovery has lost some momentum over the summer, but we expect that this will be a temporary setback and the backdrop will be strong into the medium term. There is growing evidence of a sustained commercial property upturn, albeit a weak and unbalanced one that is heavily reliant on the industrial sector. With the rental outlook still fragile elsewhere, we expect limited downward pressure on yields and only modest growth in capital values near term. Further out, office and retail face persistent structural challenges, which leaves industrial as the top performer, though even here capital value growth is not likely to sustain its current pace.
Andrew Burrell Chief Property Economist
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The resilience of the commercial property market has led to further upgrades to the IPF Consensus view for this year, albeit still below our forecast. Beyond this year, we are more downbeat about the outlook than the consensus given our expectation that work-from-home will have a more lasting impact on offices.

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Scandinavia & Switzerland: Strong investor demand

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Emerging Europe: Retail rental falls still on the cards

In line with the economic recovery, there were growing signs that property markets have turned a corner in Q2. All-property rents rose on the quarter, while the all-property yield dipped on the back of lower industrial yields. On an annual basis, industrial rents rose, while retail rents fell less sharply. Our forecast for the economic recovery to continue in H2 bodes well for occupier and investment activity. But we still expect the retail sector to struggle. Indeed, the weakness of tourist spending and the competition from e-commerce are likely to continue to drag on retailers’ incomes. Therefore, we think retail rents will end this year lower, along with office rents. In contrast, we forecast further industrial rental gains.

24 August 2021

UK Housing Market Update

Are PDRs the answer to mis-matches in supply?

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18 August 2021
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