Europe Commercial Property Outlook: Insulated from tariffs but outlook for property values is weak

European commercial property is relatively insulated from the direct impact of US tariffs, but property markets are also not likely to see substantial benefit from more fiscal spending. In all, our forecasts are little changed from our last Outlook, with rental growth set to slow over the next couple of years. With the end of the ECB easing cycle near and risk-free rates in many markets likely to edge higher, we think property yields could still rise over the next year or so. That will weigh on capital value growth, which we think will average just 1.5% p.a. over 2025-29 at the euro-zone level. At the sector level, we still think industrial rental growth will outpace the other sectors. Combined with its higher income returns, euro-zone industrial returns of 7.5% p.a. are set to outperform offices and retail, where we forecast returns of 6.5% p.a. and 6% p.a. respectively over 2025-29.