Substantial yield compression over the past two years meant that by the middle of 2022 industrial had become the most overvalued sector since our measure began in 1992. That helps explains the subsequent 26% crash in capital values. Perhaps worryingly, even after that correction the spread of industrial yields over the 10-yield gilt still looks dangerously tight. However, an improved rent outlook suggests that spread may now sustainable, and we expect only a further 4% fall in capital values this year.
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