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Property yields set to rise in H2

As the economy slowed in Q2 and interest rates rose, investors appear to have become less willing to compete property yields lower and investment volumes look close to turning. While occupier demand was steady in most sectors, there were signs of a renewed downturn in the office sector, consistent with our expectations. We think this will weigh on office values over the next few years and are forecasting a 4% capital value fall in the sector in the remainder of this year alone. But we also expect yields in the other sectors to increase over the rest of this year as potential buyers factor in a higher cost of debt as well as higher alternative asset yields.

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