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Colliers predicts total returns growth of 9% for commercial property in 2021

Colliers predicts total returns growth across commercial property sectors of nine per cent in 2021, driven by the booming industrial sector and a recovery in office occupancy and improved appetite for retail assets.

In its latest Real Estate Investment Forecast report, Colliers notes that the prediction of 9 per cent total returns growth is stronger than those forecasted in February (3.8 per cent) and June (6.4 per cent), driven by unprecedented demand for industrial assets and stronger than expected yield compression in the quarterly MSCI index across most market segments. 

Oliver Kolodseike, deputy chief economist at Colliers, comments: “The further we get through this year, the more the industrial sector pulls away from the pack. The good news is we are also seeing recovery in the other asset classes with retail being boosted by appetite for retail warehouse and supermarket stock, while offices see a steady rise in demand as occupancy levels slowly creep up. This is backed up by the fact all property yields compressed by 16bps in Q2 2021 with all major sectors recording falls in yields, led by industrial with a fall of 22bps.”

Colliers forecasts all industrial yields to fall to 4.57 per cent by the end of 2021, 59bps lower than at the end of 2020. This follows all industrial yields reaching new record lows in Q2 2021. Sustained strong rental growth is expected in the sector in the coming months. Colliers is forecasting annual all industrial rental growth of 5.2 per cent this year, with London and the Rest of South East expected to outperform at 6 per cent and 5.7 per cent, respectively. Given the ongoing strength of rental growth and firming of yields, all industrial total returns will show growth of 22.1 per cent this year, before slowing to a more sustainable rate of 6.8 per cent in 2022.

Michael Kershaw, director in the Industrial National Capital Markets team at Colliers, added: “This year is one for the record books in terms of industrial and logistics investment. Global multi-asset investors have continued to increase their allocation into the industrial sector as the pandemic resulted in decreasing occupier demand for office and retail assets. Overseas interest remains high and in H1 2021 foreign buyers accounted for more than half of all activity by value, up from the 29 per cent average share recorded over the period 2016-2020. This isn’t something we see letting up as we go into the end of the year as appetite remains high, particularly for large portfolios which allow investors to quickly increase their exposure to the sector.”

In the office sector, major occupiers are beginning to reposition themselves within the London market and committing to new headquarters on ten-year leases, although an equal number are favouring leasing flexibility and flexi-opportunities. In the South East major corporates including Amazon, Siemens, IHG and Investec were active in Q2 2021. Commitments by key blue-chip occupiers will be critical in helping to improve market sentiment and demonstrate a willingness to make significant business investment decisions, in spite of the continuing delicate economic environment.

Total returns in the office sector are expected to increase by 3.3 per cent in the South East and 3 per cent in Rest of UK this year, which compares to 3.7 per cent for Central London. All-office total returns are therefore predicted to rise by 3.3 per cent in 2021, which is an upward revision to our June forecast (2.4 per cent). All office total returns will average 5.1 per cent per annum over the 2021-2025 forecast horizon.

All retail total returns are expected to show modest growth of 2 per cent this year, having suffered a 12.4 per cent decline in 2020. Income growth will be the driver of total returns growth as capital growth is expected to remain in negative territory until 2025, when a stabilisation is likely. Retail warehouses and supermarkets are driving the sector’s performance in 2021, with all other sub sectors recording negative total returns growth.

The latest MSCI data on the retail sector indicates further modest rental declines, but many market observers continue to note a growing difference between MSCI valuation-based data and market facing reality. Colliers’ latest forecasts of the MSCI index suggest that rents will continue to fall across all retail segments in 2021, with the exception of supermarkets. Shopping Centres (-11 per cent y-on-y) and Standard Shops – Rest of UK (-12 per cent y-on-y) will see by far the largest declines. Retail parks (-5 per cent y-on-y) will hold up somewhat better than shopping centres. Supermarket rents will be flat over the forecast horizon. All retail rents will continue to decline in 2022 and 2023, averaging -1.6 per cent per annum over the 2021-2025 forecast horizon.

Download our Real Estate Investment Forecasts Q3 2021

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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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Michael Kershaw


National Capital Markets

London - West End

Michael is a Senior Director in the National Capital Markets team.  Michael joined Colliers International in mid-2010.


Michael has worked as an investment specialist for over 15 years.  Throughout that time Michael has focussed on Industrial, Office and Mixed Portfolio Investment work UK wide.  Michael is also experienced in undertaking Sale & Leaseback transactions on behalf of Corporate Clients. 


Based in Colliers Central London office Michael works closely with investment, agency and professional colleagues in both London and the Colliers International regional offices throughout the UK. 


Michael’s major investment clients include UK and International Institutions, Property Companies and High Net Worth individuals including Legal & General, Aberdeen Standard, Clipstone Land, Ascendas Singbridge, Gazeley, Peel Logistics, The Cording Group, Gramercy, The Milton Group and Colliers Capital amongst others. 

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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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