After a brief respite earlier this year, property yields are once again on the rise, driven by a further increase in gilt yields. We don’t expect a repeat of the surge seen last year, but we also think any compression beyond this year will be minimal as the spread between property yields and risk-free rates remains close to historical levels. Rents have held up better than expected, but an upcoming recession points to a slow down next year with outright falls for offices. Capital value growth will therefore average just 1.6% p.a. over 2023-27 at the all-property level and total returns will only just exceed 5.5% p.a..
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