This chart compares latest equivalent yield levels for the main commercial property sectors as reported by MSCI with their respective minimum and maximum. We looked at this chart already in May when the Q1 MSCI data was released. With the Q2 data now out, it is worth revisiting. All property yields have compressed by 16bps during Q2 and are now only 15bps above their lowest ever level. With the exception of retail, yields across the main sectors are in fact at (in the case of industrial) or reasonably close to record low levels.
If any doubts linger about the stability of UK real estate investment, these doubts may be allayed by the remarkable stability of investment yields. In Q2 2021, yields fell across all main sectors, led by industrial (-23bps) where yields have reached another record level. Retail yields compressed for a second consecutive quarter (-14bps), with Retail Parks recording a particularly large fall (-27bps) and supermarkets also compressing further (-13bps) and offices are also seeing sustained yield compression (-8bps). These surprisingly strong figures will no doubt impact on total returns forecasts for 2021. In June, we had predicted all property total returns growth of 6.4%. Our next forecasts will be released in September.