Lower yields to support capital values

We expect a further slowdown in euro-zone economic growth in 2020 to weigh on rental growth. However, with interest rates set to be cut next year and remain at this low level, there isn’t likely to be much upward pressure on bond yields over the following years. As a result, we think that there is scope for office and industrial yields to fall further, supporting capital values over the next few years. But, given the bleak outlook for the retail sector, retail yields are still expected to rise. Overall, we think that returns will slow sharply across all sectors over the coming years, with industrial returns outperforming.