The recovery of the global economy subsequent to 2020’s hard lockdown-related recession, coupled with major global supply chain disruptions to the supply side of the economy, has unleashed a surge in inflationary pressures.
From a decade low monthly average of 6.9% in May 2013, the monthly average long bond yield ended the year 2021 three percentage points higher at 9.9%, and the broad rising trend is expected to continue in 2022.Average capital value per square metre on commercial property expected to stop falling in nominal terms in 2022, but not in"real" inflation-adjusted terms.
While much economic activity has normalised as lockdown regulations have been eased, three major challenges face the battling hotel property class. Firstly, a large portion of demand for hotel rooms is non-essential in nature, and with many businesses and households financially pressured in the aftermath of the major 2020 recession, many will continue to put travel and hotel stays on the back burner.
This major class is expected to see its national average vacancy rate continue to climb in 2022, as many companies revise their office space needs down. Much has been made of the work from home surge, and this is a key dampener of demand for office space. As lockdowns ease and economic activity trends towards"normal", more employees will go back to their offices.
Retail property performance improved in 2021, but 2022 will likely make further improvement tough going. After underperforming the office market in the 2020 lockdown year, retail property made something of a comeback in 2021, and its total returns last year likely outperformed those of office property but underperformed those of industrial property. Sandwiched in between the industrial and office markets are where we expect retail property returns to stay in 2022.
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