For the first time since mid-2009, IPD reported that in Q1 2012 yields on lower quality commercial property increased. Not least because of higher distressed loan work-outs, we would be very surprised if that marks the end of the increases in non-prime yields. Our forecast is that all-property capital values will drop by 6% this year and, on the assumption that prime yields stay flat, it would only take a further 25bps increase in non-prime yields for that view to be proved correct.
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