Is the low office to retail yield spread sustainable?

The current situation, where IPD all-office yields are lower than all-retail yields, is almost unprecedented and, in our view, not sustainable. Consistent with this, our forecasts already envisage that the recent outperformance by offices will not be repeated over the period 2012 to 2014, with capital values falling by more than retail. If anything, however, the analysis in this Focus suggests that the risks to those already downbeat office forecasts are to the downside.