As economic activity weakens, we maintain the view that the Bank of England will look to hold interest rates close to current levels until mid-2024. However, higher long-dated bond yields and upside risks to inflation mean the property asset value decline is not quite over yet.

• Real GDP rose by just 0.2% m/m in August, with weak retail sales data suggesting consumer resilience is fading.
• Wage growth and inflation remain elevated, but forward-looking indicators support our view that the full impact of restrictive monetary policy is beginning to feed through.
• UK commercial real estate investment volume in the 12 months to the end of Q3 2023 reached just £40bn - the lowest four-quarter total since 2012.
• Office investment activity is at record lows, but demand for logistics and living sector assets remains far above pre-pandemic levels.
• Prime yields are beginning to look historically attractive, but most buyers continue to wait in anticipation of more attractive risk-adjusted returns.

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