Signs of a slowdown emerging

Annual all-property rental growth reached a five-year high in May, while returns rose to levels last seen in mid-1994. But signs of a slowdown also emerged, especially in the red-hot industrial sector, where capital value growth and total returns eased for the first time in almost two years. In addition, the recovery in retail and offices lost some steam, with monthly rental growth rates nudging lower. We expect the pace of growth will let up soon as yields start to stabilise and structural changes weigh on occupier demand. As such, we expect returns to cool to below 10% by end-2022.