Property yields rose further in Q3, but with risk-free rates now falling back, we think they will flat-line in Q4. That will help stabilise capital values, but given historically narrow yield spreads, we doubt we will see much yield compression ahead. As the economy enters a mild recession next year, we expect rental growth to slow. That means the recovery will be tepid, with all-property total returns of 6.3% p.a. over 2024-27. Offices also face structural challenges from the shift to remote work and will underperform, with returns of just over 5% p.a.. The industrial sector has the best rental outlook, but thanks to higher income returns, retail is set to be the best performer with total returns of just over 7% p.a. over the forecast period.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services