Global Private Banking The office sector has been most in city centres are struggling with slow because people usually cut impacted by the pandemic due to lower footfall from tourism (which discretionary spending (such as eating the permanent shift towards hybrid remains well below pre-pandemic out and holidays) before missing working. Geographically, this shift has levels) and the reduced frequency their monthly rent payments. In been greater in the US and Europe of white collar workers going into addition, higher interest rates have than in Asia-Pacific where a stronger the office. reduced the affordability of buying cultural attachment to the office and E-commerce spending (as a share of flats and houses, further sustaining higher density cities support office all retail sales) has fallen back into line demand from renters. Whilst there working. Whilst occupiers may have with its pre-pandemic trend in many may be some signs, specifically in the reduced their overall need for office economies. Still, logistics leasing US, of multifamily rents stabilising, space, there has been a notable shift remains above trend as, in addition demographic tailwinds continue to towards leasing better quality space to demand related to e-commerce support other parts of the residential that supports corporate sustainability spending, businesses invest in sector such as single-family and targets. Offices in secondary improving supply chain resilience after senior housing. locations needing substantial several years of disruption caused Direct property valuations rely on capital expenditure due to by the pandemic and geopolitical evidence of market transactions and, environmental regulations are upheaval. Market rents are typically as a result, will take time to adjust considered most at risk. above in-place rents currently paid by to the current environment of higher Retail property fundamentals have tenants indicating substantial income interest rates, slowing economies and been recovering from the big COVID- growth for landlords even if market weaker investor demand. By contrast, pandemic hit. However, the cost of rental growth slows. publicly-listed real estate equities are living crisis hurts retail spending. Residential property is amongst the marked to market and adjust quickly. Moreover, many prime retail locations more defensive sectors as economies 39