Capital growth prospects for real estate have strengthened over the next two years, according to the Investment Property Forum Winter 2023 UK Consensus Forecasts.

But the office market will have a tough 2024, and the middle of the decade could be a little slower than hoped.

So said the regular analysis based on predictions from 19 of the biggest names in real estate including Legal & General, M&G, MSCI, the Investment Property Forum and specialists such as Warehouse Reit and Life Science Reit.

The average capital value growth forecasts for 2023 and 2024 have been upgraded from the previous quarter's survey. In practise this means replacing the previous dire forecast with a not quite so bad one. The 2023 forecast is now -5.5% compared to a previous prognostication of  -7.1%.

In contrast, the 2024 forecast is 2.2%, a modest improvement on an earlier forecast of 1.9%.

Yet the assumption of an earlier recovery has taken the edge off forecasts for 2025 and 2026, down to 2.9% and 2.5% from 4.1% and 3.4%, respectively.

Fund managers remain a degree more optimistic about rental growth than their advisers in the agency world. Over the annualised five-year period, the average rental growth forecast from fund managers is 1.7% a year, compared to 1.2.% a year from property advisers.

With the exception of offices in 2023 and industrial in 2025 and 2026, all other consensus rental growth forecasts across the sectors have been downgraded modestly across the forecast period.

Despite a more positive outlook for 2023 across all sectors, only industrial is expected to deliver a positive total return, of just 0.4%. The all-property return is predicted to be -0.6% in 2023, rising to 7.2% in 2024 with retail warehousing and sheds expected to outperform.