UK commercial property rental growth continues to surprise on the upside, but the capital value recovery is already running out of steam. Looking ahead, weak economic growth, a narrow spread between property yields and risk-free rates, and potential changes to SDLT rules and upward-only rent reviews all pose headwinds to the sector. We therefore expect all-property total returns to average only 7.5% p.a. over 2025-29, a weak recovery by past standards. A resurgence in rents means retail is now our top performing sector, with shopping centres set to return around 9% p.a. thanks to a strong income return.
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