With the recovery running out of steam and the emergence of the Omicron variant posing a downside risk, the economic backdrop is likely to provide less support to the property recovery over the coming quarters. Nevertheless, we think that both prime office and retail rents will return to growth next year, while industrial will continue to climb. Reflecting the better rental outlook, we expect yields in all sectors to edge down in 2022. That said, given the structural shifts from e-commerce and full supply pipelines, the rebound in rents across all sectors will be modest at best. And beyond 2022, rising property yields on the back of higher bond yields mean that property values are set to struggle. As a result, total returns will be driven by income returns, with retail overtaking industrial after 2021.
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