Property yields rose further in Q3, but with risk-free rates now falling back, we think they will stabilise in the first quarter of 2024. But given historically narrow yield spreads, we doubt we will see much yield compression ahead either. As the economy enters a very mild recession this year, we expect rental growth to slow. That means the recovery will be tepid, with all-property total returns of 6.4% 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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