Sustained occupational activity, but choosier tenants
Occupational activity will be maintained, and rental growth sustained (unless there’s a sudden rise in tenant exits). However, we have begun to see how selective tenants are on location, with prime buildings in secondary spots proving much harder to let than would be normal in this phase of the property cycle.
Indeed, in the case of offices, we believe that a perfect location can compensate for a less than perfect building, something that should enable developers to value-engineer plans to secure a better return. Overall, the supply-demand dynamics are keeping offices our top pick for investors in 2026, so long as they take into account the micro-market supply trends and location nuances before purchasing.
Retail vacancy rates in dominant locations are down to cyclical lows, which delivered rental growth over 2025, although this may soften slightly in 2026 as retailers face higher operating costs. Medium-term, however, we remain optimistic about a lot of retail, and shopping centres especially are looking increasingly defensive against some wider structural macro changes.