The indebtedness of Western economies – including our own – along with rising inflation caused by the conflicts in Ukraine and the Middle East, have caused bond yields to surge.

Despite prime minister Andy Burnham’s claim that the UK shouldn’t be “in hock to the bond markets,” we undoubtedly are – and UK government bond yields remain persistently high.

As a result, interest rates are once again on the rise, stymieing hopes of a reset for commercial real estate values.

So much of the money used to fund real estate investment and development is borrowed. What’s more, commercial property values have an inverse relationship with interest rates moves: as borrowing costs rise, values are squeezed.

This has made landlords shy of bringing their assets to market. When they do, potential deals are often spiked when buyers and their lenders get jumpy. Unfortunately, we are seeing a lot of this, not least because it’s becoming increasingly common for second round bids to be lower than those in the first!

With trading volumes subdued, new development starts are no better, with cost pressures straining viability. According to CoStar, new office construction is close to its lowest point in 15 years.

At Innes England, we’re finding that borrowers are no longer loyal to lenders. The canny among their number switch as soon as they are able to get a cheaper deal. From my own experience, we are more frequently valuing for one lender, then, in quick succession, being asked to revalue it for another.

But despite the financial headwinds, there is some good news if you care to look for it.

Many landlords who are holding on to assets are taking the opportunity to invest in them, perhaps refurbishing them and driving up rents. These assets will be well positioned once the market turns.

Rental growth, particularly for prime offices and residential assets, is also encouraging. This will help offset the interest rate hit and should help with repricing once we turn the corner.

Industrial and logistics assets actually performed against the general trend to hold assets, with transactions up in Q3 compared to Q2.

Perhaps the most encouraging signs are that occupier demand is largely resilient and this, coupled with development constraints, means rents are inching northwards. These underlying fundamentals are helping to stave off the worst effects of a highly volatile market.