UK commercial property is relatively well insulated from the direct impact of US tariffs, and some sectors may even see small benefits. Rental growth has also held up better than expected. But with increased uncertainty weighing on economic growth we have only raised our all-property rental growth forecast slightly and now expect growth of 2.5% p.a. over 2025-29. At the same time, we now think the 10-year gilt yield will fall back more gradually. Yield compression over the next few years will therefore be limited. We expect all-property total returns to average only 7.5% p.a. over 2025-29, a weak recovery by past standards. The top performing sectors are residential, where strong rental growth will help total returns average around 8.5% p.a., and retail warehouses (at 8.4%), which will benefit from strong income returns.
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