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.
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