Q4 property valuation scores rose from their Q3 troughs, as equity earnings yields fell and property yields all increased. Even so, that left all major sectors still looking overvalued, suggesting yields have further to rise before property looks fairly valued against alternative assets. We expect a similar-sized rise in property yields in the next couple of quarters to move property valuations closer to fair value. However, we expect industrial property to continue to look overvalued on this measure for the foreseeable future. At a metro level, NYC and San Jose offices, as well as Chicago apartments all now look fairly valued, but, in our view, these markets remain amongst those with poorest rent growth prospects.
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