Structural changes will keep office and retail in the doldrums

While the news of vaccines provides a fillip to our economic outlook, it does not have a major bearing on our occupier market forecasts. After all, we expect that structural change, rather than cyclical growth, will be the major driver of occupier activity in the next five years. This will be to the detriment of the office and retail sectors, but a boon for industrial property. Apartments will see a limited impact from structural change in the short term. The upshot of this is that retail and office returns will average only 4% p.a. in the 2021-23 period, before strengthening thereafter, whereas industrial total returns should average roughly double that, at 8.5%-9% p.a. in the next three years. Apartments should return around 7% p.a.