Office metro-level divergence to persist

After a period of strong economic growth in H1 2021, with high inflation squeezing incomes and the spread of the Delta variant, the outlook for H2 is less positive. That said, we don’t expect this to have a major effect on occupier markets, which will continue to be driven more by structural factors than cyclical ones. Low interest rates and a more stable economic outlook are driving strong capital flows into real estate, with the apartment and industrial sectors the major beneficiaries. Yields in those sectors have hit all-time lows and are set to fall further in H2, driving rapid rates of capital growth this year. Large metro-level divergences in performance are set to persist as readjustments in working, living and shopping patterns continue.