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Colliers revises up its property returns predictions to 5.3 per cent in 2023

15 03 23 Returns predictions hero

Figure improves following faster rise in yields and sharper fall in returns in 2022 as market rebases.

All property returns are predicted to grow by 5.3 per cent in 2023 and 10.8 per cent in 2024 according to Colliers’ latest Real Estate Investment Forecasts (REIF), an upward revision from the 3.1 per cent and 9.1 per cent the firm predicted in its Q4 2022 report.

Oliver Kolodseike, director in the Colliers Research team, commented: “Yields have risen faster than we had anticipated in Q4 2022, and we believe that the current re-pricing period will come to an end towards the middle of the year, with slight re-compression across several sectors in H2. 

“This, combined with the fact that total returns fell sharper than we had anticipated in our Q4 2022 REIF, has led to upward revisions to both our 2023 and 2024 forecasts. We now expect total returns growth of 5.3 per cent this year (previously 3.1 per cent) and 10.8 per cent in 2024 (previously 9.1 per cent). Over the 2023-2027 forecast period, All Property total returns growth will average 8.6 per cent per annum. Industrial (10.4 per cent per annum) and retail warehouses (9.7 per cent per annum) will outperform the other sectors.”

The report highlights that all office returns fell by 9.8 per cent in 2022, marking the steepest drop since 2008 when returns declined by 22.8 per cent. While rental growth of 2.2 per cent was sustained last year, yields rose by almost 100 bps in H2, resulting in a 13.2 per cent decline in capital values. Colliers believe that yields will continue to rise over the coming quarter, ending 2023 at 6.66 per cent, up from 6.47 per cent at the end of last year. Total returns growth will be weak this year as office rents fall (2.0 per cent) before accelerating to 8.4 per cent in 2024. Over the forecast horizon, total returns growth will average 6.5 per cent per annum, with South East (7.9 per cent per annum) the star performer.

Rental growth for industrial is expected to slow from the strong rates recorded throughout most of 2021 and 2022. All Industrial rents are forecast to increase by 3.7 per cent in 2023, before accelerating slightly over the remainder of the forecast horizon to 2027. The firm predicts a further rise in yields in Q1 and potentially Q2 before stabilising and re-compressing towards the end of 2023. Beyond 2023, yields will compress, moving from a predicted 5.70 per cent at the end of 2023 to around 5 per cent by the end of 2027. 

All Industrial total returns fell by 14.6 per cent in 2022, but Colliers predict a return to growth in 2023 (+5.4 per cent). Total returns growth will then accelerate to 13.6 per cent in 2024 and remain in double-digits until the end of the five-year forecast horizon.

Given the sharp pricing adjustments in retail that have already taken place, some segments of the sector have scope for mild compression in H2 2023. All Retail yields will therefore end this year at 6.51 per cent which is 13 bps lower than at the end of 2022. Yields will then continue to move in to 6.28 per cent in 2024. Retail Warehouses (-77 bps) and Standard Shops – Central London (-53 bps) will see the sharpest fall in yields over the forecast horizon. 

Total returns across the retail sector fell by 4.8 per cent in 2022 but will return to growth of 8.5 per cent this year as capital values increase again. Over the 2023-2027 period, total returns growth will average 8.5 per cent per annum, driven by Retail Warehouses at 9.7 per cent per annum.

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Oliver Kolodseike

Director of Economics and Research

Research and Forecasting

London - West End

Oliver is Head of Economic Research and leads the quarterly UK forecasting process including the publication of Colliers' Real Estate Investment Forecasts (REIF) report. He also  authors the monthly Property Snapshot and, quarterly Scotland Snapshot. Prior to joining Colliers, he worked for the Centre for Economics and Business Research and IHS Markit. Oliver holds a BA in Economics from  Georg-August University Göttingen (Germany) and an MSc in Economics from Exeter University.

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Rebecca Allen

PR Manager

Marketing & Communications

London - West End

I have been working in commercial property communications for over 10 years  having previously worked at CBRE and Savills.

In my role at Colliers I am responsible for the PR of National Capital Markets, London Offices and Investment Property  Management teams as well as Scotland.

My role includes:

  • Creating and exectuing PR plans for business lines that span press, marketing and digital channels
  • Media monitoring and reporting
  • Advising on brand, tone of voice and profile raising 
  • Journalist relationship building through face to face meetings, phone calls day to day assistance with stories
  • Reputation management of the Colliers brand



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