In their recent update, the IMF declared that the ‘likelihood of a soft landing has increased.’ But even a soft landing may not be the fillip that real estate investors want; if investors follow the occupiers, then weak global demand is not an environment that will stimulate a strong recovery in leasing activity and rents. But it is important not to generalise, particularly in the office sector, where most markets are seeing a bifurcation between the best quality buildings, which continue to attract tenants, and the older, poorly located stock.

In the meantime, institutions remain somewhat circumspect as unfavourable market conditions – including high interest rates and a slowing global economy – favour a wait-and-see approach from investors. Some markets have seen prime yields move out again this quarter. However, with interest rates now peaking, the first pre-condition for stability has been met. Commercial real estate is slow-moving at the best of times, but nevertheless, some more certainty around interest rates and borrowing costs should help to facilitate a floor in pricing, and eventually a recovery in investment activity, particularly for those investors who can separate the art from the artist.

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