Structural change hits rental growth

The near-term outlook for most commercial property sectors is poor despite the early signs of economic recovery. Although transactions are set to pick-up post-lockdown, we think property yields will rise further as the rental outlook deteriorates. Between 2019-24, we expect all-property rental value growth will be at best flat. This reflects not only cyclical weakness, but also lasting structural change, such as more remote working and more online spending. Overall, all-property returns will average 4.3% a year, which is weak by historical standards and a downgrade on our previous view.