A further deterioration in the economic backdrop is set to weigh on property rental growth, especially in the consumer-facing retail sector where we have revised down our rental forecasts in the near term. This comes at a time when higher interest rates and stretched valuations are pushing up property yields. At the CEE level, we expect a cumulative 45bps increase in all-property yields over 2022 and 2023. While the strength of industrial rental growth should prevent capital value falls in that sector this year, rising yields will result in broad-based declines in 2023. The upshot is that industrial will continue to outperform in the near term. However, stronger rental prospects further ahead mean that retail will come out as the best performing sector from 2023.
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