Property yields rose across all sectors in Q3, but this was offset by a sharp rise in alternative asset yields towards the end of the quarter. As a result, all sectors saw a deterioration in valuations, which pushed the retail sector back into the overvalued range along with industrial and apartments. Another large rise in office yields meant the sector still looked fairly valued in Q3. And the especially-poor outlook for offices leads us to expect yields will rise significantly next year, which will support valuations for the sector in the near-term.
Looking ahead, we expect further rises in property yields across the sectors in 2024. Meanwhile, we think the 10-year treasury yield will drop to 3.75% by end-2024. Together, this should allow valuations to improve throughout next year.
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