In the absence of a full-on second wave of the virus, we expect a strong economic recovery in the second half of the year and into 2021. Nevertheless, we expect occupancy to fall this year as absorption turns negative in most sectors, prompting a decline in rent levels. We are forecasting that rents will grow again from 2021, but in the office and retail sectors, that recovery will be weak. Higher risk premia for owning property and reduced income streams will cause yields to rise this year, by around 30-40bps at the all-property level. This will cause capital values to fall by around 8-10%, before growing next year by 7-8%. We do not expect retail capital values to return to their 2019 levels in our forecast horizon.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services