The pandemic has led to a 2.3% decline in all property returns in 2020, but we predict growth of 9% this year driven by the booming industrial sector, recovery in office occupancy and improved appetite for retail assets.
By the end of 2021, yields will have compressed by over 30bps from their 2020 levels as annual investment volumes are on course to reach £60bn this year.
Although inflation remains above the Bank of England’s target and may reach 4% this year, policymakers still believe a spike in inflation will be transitory. However, the BoE will monitor wage growth developments closely to see if they prove temporary or more permanent and feed through into longer term inflation. Markets now anticipate the first rise in Bank Rate in mid-2022.
In this quarter’s REIF, we highlight:
- Industrial yield compression to continue as investor demand surges
- H1 2021 investment volumes ahead of both 2019 and 2020 figures
- Occupier demand shows steady signs of returning to long-term averages