Higher interest rates and bond yields – a key determinant of value for commercial property – as well as weak demand will weigh the heaviest on lower grade office space.
– could send some office building values tumbling another 20 per cent lower, according to a survey of analysts and economists byWhile all commercial property classes will be exposed to higher rates and bond yields – the 10-year government bond yield is a key determinant for commercial real valuations – the office sector was seen as most vulnerable, according to the panel of nine experts.
Also among the office bears was Oxford Economics senior economist Maree Kilroy, who expects a 17 per cent slide in prime CBD office values in Sydney. But he expected the values of higher-grade offices would be protected from the effects of a rising cap rate due to their net effective rents rising. Mr Martin-Henry expects industrial values to achieve a “mid-single digit” percentage point gain by the end of 2024. Knight Frank chief economist Ben Burston also tipped industrial values to rise, due to strong occupancy and income growth expectations.
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