What:
The chart shows our latest commercial property performance forecasts which are published in the quarterly Real Estate Investment Forecasts (REIF) Report. The report contains forecasts for various indicators, such as total returns, rental growth and yields across all main sectors. The forecasts are based on the widely used MSCI data and may therefore not always accurately match market evidence. We note that there is a particularly large discrepancy between MSCI data and market evidence for some retail assets, with the MSCI data pointing to much shallower rental declines than we are seeing in the market.
Why:
The pandemic has led to a modest 2.3% decline in all property total returns in 2020, but growth will return this year and our forecasts suggest total returns growth of 9.0% in 2021. This is stronger than both our February (3.8%) and June forecasts (6.4%). The upward revisions are driven by unprecedent demand for industrial assets and stronger than expected yield compression in the quarterly MSCI index. In 2022 and 2023, we expect total returns growth of 6.2% and 5.4%. Over the five year forecast horizon, industrial and retail warehouses are predicted to be the best performing sectors.
