Current commercial property derivatives prices suggest that IPD total returns this year will be markedly lower than either our expectations or the IPF Consensus forecasts. The derivatives market may be proved right. However, over the past three years the record of the derivatives market in the early part of the year as a predictor of end-year returns is poor. The fact that implied returns have been fairly stable, at sub-consensus levels for several months now, is not necessarily evidence that the derivatives market knows something we don’t.
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