UK Commercial Property

Gradual rate rises will not derail property

UK Commercial Property Outlook
Written by Capital Economics Economist

Capital value growth is slowing, but a further moderation in rental value growth along with a gradual rise in property yields means the slowdown has further to run. Nevertheless, our above-consensus outlook for GDP growth, combined with the fact that property yields are unlikely to return to previous highs as interest rates rise, suggest that the commercial property market is unlikely to experience a hard landing.

We expect average total returns to range from 2% to 8% over the forecast horizon. Within this total, high street and central London and South East office markets are likely to underperform, while the prospects for office and industrial property in the Rest of the UK look to be the strongest.