Prime office outperformance to wane

The limited hit to economic activity from the Iran war and our expectation that risk-free rates will fall back mean we forecast only a temporary slowdown in European commercial property value growth this year. Nevertheless, the narrow spread between property and bond yields will prevent strong capital value gains further ahead. Near-term strength in prime office rents will support total returns, but we expect this to wane. That will leave industrial the outperformer over 2026-2030, given high income returns and solid rental prospects supported by the rise in online spending. Overall, we forecast euro-zone industrial returns of around 7.5% p.a. over 2026-30, compared with 6.5% for offices and 6% p.a. for lower-yielding retail.