By boosting real disposable incomes, the energy price cap will give some support to commercial rents, particularly in consumer-facing sectors such as leisure and retail. However, that benefit needs to be set against the risk that interest rates will now be higher due to the fiscal expansion. While we think investors’ expectations for Bank Rate have gone too far, property yields are now likely to be slightly higher over the next couple of years. That will outweigh the boost to rents, and we now expect all-property capital values to fall by over 4% in 2023.
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