Higher interest rates have already resulted in a sharp property repricing in 2022. And with valuations still highly stretched and rental prospects weaker given the imminent recession, we think values will fall further next year. However, as we think government bond yields have peaked and the economy is set to start its recovery in the second half of next year, we think the peak-to-trough fall in euro-zone all-property capital values will be limited to around 15%. The decline will be largest for offices, with stronger rental growth supporting industrial and a smaller rise in yields expected for retail. Structural shifts also favour the industrial sector further ahead and therefore we expect industrial to outperform the other sectors with total returns of 6% p.a. over 2023-27. Retail will also do better than the all-property average of 5% p.a., while office returns will trail at 4.5% p.a..
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:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services