Thin deal evidence and market uncertainty has meant that the disruption from the virus has been slow to feed through to property values. However, significant falls in economic activity in H1 and continued uncertainty about the outlook have weighed on occupier demand, which means a repricing of property is inevitable, particularly in southern European markets. The economic recovery underway will support demand going ahead. But economic activity is only likely to pick up gradually. This is especially the case in the consumer and tourism sectors, which will limit the recovery in retail values. That said, ultra-loose monetary policy will keep bond yields low, supporting property valuations. As such, we think that there is scope for office and industrial yields to more than reverse their 2020 rises in the coming years.
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