Russia’s invasion will trim real estate returns

Our latest baseline forecast incorporates the economic impact of the Russia-Ukraine conflict, which has led us to downgrade our real estate forecasts, albeit relatively moderately owing to the mainly indirect transmission channels.

What you will learn:

• Differences in regional performance have widened, with returns in Asia Pacific and North America less affected, whereas the impact on Europe will be greatest. Our forecast for eurozone all-property total returns is now 2.8% lower by end 2025 than under the previous baseline.
• The impact within Europe varies, depending on trade and energy market links – we lowered returns in Germany, France, and CEE by more than in the UK and Nordics.
• The key transmission channel for commercial real estate, just as it is for the broader economy, is through inflation via squeezed real incomes lowering demand and raising yields.