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Property yields under pressure from higher rates

Our new, higher, UK interest rate forecast means we now expect commercial property yields will start to rise by the end of this year, earlier than in our previous profile.
Pieter Du Preez Property Economist
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More from UK Commercial Property

UK Commercial Property Data Response

RICS Construction Market Survey (Q2)

The latest RICS Construction Survey showed a further rise in workloads during Q2, though sentiment for the next 12 months worsened slightly. With labour and supply shortages remaining a major concern and signs that rising interest rates are biting, we expect building activity to weaken in the near term.

4 August 2022

UK Commercial Property Data Response

S&P Global/CIPS Construction PMI (Jul.)

The fourth consecutive decline in the headline construction PMI took the index below 50 for the first time since January 2021. While driven by an idiosyncratic drop in civil engineering activity, the upbeat new orders and future activity balances look wildly optimistic. Bank of England Drop-In (4th August, 10:30 ET/15:30 BST): Join our post-MPC, 20-minute online briefing to find out why we think UK rates will rise by more than most expect, despite a looming recession. Register now.

4 August 2022

UK Commercial Property Update

Stretched consumers to cut back on leisure spending

As the cost-of-living crisis bites consumers will be forced to cut back on discretionary spending, with the leisure sector set to suffer as a result. At the same time, operators are facing shortages of labour and rising costs. We have therefore cut our rental value forecast to a 1% fall this year and no change in 2023.

Bank of England Drop-In (4th August, 10:30 ET/15:30 BST): Join our post-MPC, 20-minute online briefing to find out why we think UK rates will rise by more than most expect, despite a looming recession. Register now.

2 August 2022

More from Pieter Du Preez

UK Commercial Property Data Response

RICS Commercial Property Market Survey (Q1)

The latest RICS survey showed that office and retail occupier activity improved significantly in Q1 and that respondents were more positive about the prospects for property over the next 12 months. But the economic environment has deteriorated since then, dampening prospects for the sector.

28 April 2022

UK Commercial Property Chart Book

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.

22 April 2022

UK Commercial Property Update

Pandemic provides a boost to life sciences centres

Investor interest in the life sciences sector has jumped since the onset of the pandemic. Increased investment and employment opportunities are expected to continue to support demand for related office space, with UK centres, notably Oxford and Cambridge, likely to benefit.

14 April 2022
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