UK senior commercial property debt currently offers a gross return of 3.4%

On a risk-adjusted basis, we forecast that return to be 3.0%

Offering a premium of 2.7% to Gilts, and 2.0% to corporate bonds, commercial property lending represents a compelling fixed income value play

Indeed, returns from senior lending are only marginally lower than those forecast from direct property, at 3.9%pa over the next five years

In Q4, we estimate that margins were broadly flat. Interest rates and Gilt yields saw only minimal change. Pricing on CMBS and corporate bonds tightened

Our forecast of Probability of Default increased, from 2.7% to 3.3%, as the outlook for key sectors including non-London offices weakened