Following a sharp increase in Treasury yields, property valuations worsened for the second consecutive quarter in Q1. And we expect 10-Yr Treasury yields to resume their upward trend to reach 2.25% by end-2021, which will squeeze property valuations further. Widespread falls in valuation scores across the sectors mean that industrial and apartments now look fair value, with office and retail still looking undervalued. But given the weak rental growth prospects in those sectors, we think that office and retail assets may need to see further yield rises before they become sufficiently appealing to attract investors.
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