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Although 2022 started positively, with a growing economy and strengthening labour market, geopolitical events soon took over. The Russian invasion of Ukraine pushed up energy and other commodity prices, adding more pressure to the already inflationary backdrop. Political events also dominated the domestic landscape, in a year with three prime ministers, four chancellors and six fiscal events.

We enter 2023 under the spectre of a moderate recession, with high inflation and rising interest rates putting downward pressure on growth. As a result, the environment will be more challenging for property, with higher debt costs, and we expect, lower investment volumes. Still, it should be a short lived and a moderate recession, with the green shoots of recovery evident towards the end of the year. Real estate investment markets will emerge from a period of uncertainty, pricing should stabilise, and activity should return. However, conditions will remain challenging for the deployment of equity and debt capital and will require investors to adapt.

For all assets we expect a continued flight to quality, and real estate that does not match investor and occupiers' environmental goals will be increasingly marginalised.

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