Capital value outlook boosted by lower risk-free rates

With the euro-zone economy set for a period of weak growth, the outlook for rental growth across the sectors is poor. While this would normally lessen the case for yields to fall further, with risk-free rates expected to stay at very low levels, we think that some further compression is likely in the office and industrial sectors this year, before stabilising for a period. However, we don’t expect this to be the case in the retail sector as it deals with both cyclical and structural headwinds.