Given the prevailing level of risk-free rates, it is hard to make a compelling case that commercial property is overvalued as an asset class. Admittedly, valuations in some segments, such as offices in London and the South East, look rather more stretched than the all-property average, so yields here may be the most vulnerable to any rise in rates or shifts in investor sentiment.
But if we are right that the economy will surprise on the upside, underpinning occupier demand and rental values, and that any rises in interest rates and risk-free rates will still leave them low by pre-financial crisis standards, then it seems unlikely that the commercial property market is about to suffer another correction.
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