Latest RES Property Market Forecasts
As we embark on the journey of predicting relative sector performance over the next five years, let’s analyze the key metrics shaping their prospects. By examining the current level of income return (or yield), reversionary potential, rental value and yield movement prospects, we can gauge which sector is likely to outshine the others.

London Industrials:
With an annualised income return of 3.7% as of Q4 2022 and a high reversionary potential, London industrials can boast an attractive income position. Furthermore, the sector is still experiencing robust rental value growth, increasing at an annualized rate of 6.9% in Q1 2023. Despite a moderation in future growth and an outward yield shift this sector tops our rankings.

Retail Warehouses:
With an income return of 6.5%, the retail warehouse sector is not reliant on growth, but rental values did rise at an annualised rate of 1.7% in Q 2023. The high income return is expected to lead to a modest fall in yields, and although rental value growth for retail warehouses is not as substantial as London industrials, standing at 1.7% in Q1 2023, the sector’s solid income return secures its position as the second-ranking sector.

West End Offices:
West End offices offer a reasonable annualized income return of 3.1% and possess high reversionary potential. Currently, rental value growth is modest, with an annualized rate of 2.3% in Q1 2023. While it may also not exhibit the same level of growth as London industrials, the potential for some modest rental growth and a small inward yield movement positions West End offices in third place.

Logistics:
Despite currently strong rental growth and relatively high yields, logistics ranks last in our assessment. While the sector’s annualized income return of 4.7% is appealing, the expectation of a sharp slowdown in rental values and rising yields affects its long-term prospects. These factors contribute to its lower placement in the rankings.

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