There are signs the economic slowdown we have anticipated is beginning to take hold. But the risks do not appear to be fully reflected in valuations; direct real estate still looks overpriced relative to both the listed sector and units in unlisted property funds, which adjusted to the weaker outlook 12 months ago. It is possible that liquid markets are understating the importance of real estate’s relative pricing; property still offers attractive risk-adjusted returns compared with other asset classes. The real estate yield spread over bonds remains particularly healthy and demand from income seeking investors is robust. A disconnect between pricing and fundamentals is particularly evident in central London’s office market. A wave of new development is coming to completion just as occupier demand begins to falter and Brexit threatens to compromise financial services firms’ access to the single market. Regional office assets appear less sensitive to the fallout from Brexit and a dearth of supply in many markets is supportive of rental growth. Lower consumer spending is likely to accelerate the ongoing polarisation in the retail sector. Weaker parts of the market look particularly challenged. High-quality assets in ‘destination’ locations should prove much more resilient. In the industrial sector structural changes underway are favourable. The rise of e-commerce is fostering demand for warehouses, logistics hubs, and ‘last-mile’ delivery depots.