Commercial property yields and capital values have stabilised in recent months, which has encouraged investors to dip their toes back into the sector. But the recovery is set to be a weak one. Admittedly, we expect rental growth will be a decent 3% p.a. over 2024-28 at the all-property level. But with little prospect of any yield compression on the horizon, capital value growth will be limited and all-property total returns will average around 7.5% p.a. As well as the in-favour industrial and residential sectors, investors looking for a better return should also focus on retail, where strong income returns and the reappearance of rental growth will help total returns match those for industrial.
Our commercial property forecasts can be accessed via our new Commerical Property Dashboard, see here.
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