It cannot be denied the domino effect that the still ongoing pandemic has had on the on the property and economic markets over the last year and a half, but there may still be hope yet. In CBRE’s 2021 UK Real Estate Market Outlook, they predict that the office market is heading towards a major rebirth, with a focus on redesign, premium collaboration spaces, and Grade A space proving more popular than ever, it is thought that UK office yields will remain stable despite a fall in capital values of around 11% over 2020 and 2021.
It is thought that post-covid, the amount of time spent on average working from home is set to be higher than it was before. However, in a 2016 survey of millennials by CBRE, 79% of respondents indicated that the quality of the workplace had a part to play in their selection of jobs, which means that younger people may actively seek an office lifestyle that has a sense of routine. With this influx of young office workers, the demand for high quality office spaces that serve the purpose of mental health and wellbeing just as much as workplace practically is a necessity moving forward.
CBRE sees BTR (build-to-rent) as sector where growth will occur, and in Manchester more than 70,000 households are due to be living in BTR accommodation by 2028. This rise is thought to be due to three integral factors: the population of 25–34-year-olds, the student population, and economic growth. Manchester is home to the second largest student population in the UK of over 50,000 and boasts one of the strongest graduate retention levels, which means that students are choosing to stay in the city after graduating and build their careers, which is a perfect BTR target audience.
In the retail sector, over the past year there has been a drastic change to the high street dynamic. It could be argued that the pandemic and subsequent lockdowns accelerated an inescapable fate: the takeover of online shopping. Due to high streets being shut through the lockdowns, there has been a huge online surge that has reverberated across the retail world, with high street giants such as Debenhams and Topshop closing down and online clothing stores reaping the benefits, with online retailer ASOS reporting profits of 250% over the first lockdown. Current restrictions are creating serious challenges in this sector, but the physical retail experience may still prove a breath of fresh air when the pandemic comes to an end and encourage customers to seek out this timeless form of social interaction.
Of the sectors that are the worst affected by the pandemic, the hotels and hospitality market has suffered the most, but with this has come the opportunity to adapt the industry to cope and evolve for the new normal. Throughout the pandemic, we have seen landlords and tenants coming together to help free up supply chains and open shared facilities to help support the pandemic. This year we expect the closer operator-landlord relationship that we have seen be formed will help survive weaker demand and fierce competition within the sector.
Residential property is also forecast to have a resurgence as we move through 2021, supported by tax incentives, resilient demand and lagging supply. The CBRE report predicts steady, continual year-on-year growth in the multifamily (institutional rented) sector, to £6 billion in 2025. In the owner-occupied sector, house prices and rents are thought to remain stable throughout the year increasing by 1.0% and 0.9% respectively.
Overall, the short-term issues that have arisen from the pandemic will continue to affect the state of real estate throughout this year, and each sector will be affected differently. With this being said, it is also likely that pioneering figures in each sector who have applied themselves and proved the ability to adapt to the situations given to them, will continue to thrive and bounce back. With COVID vaccines now being ruled out, it is safe to say that a light at the end of the tunnel is easy for everyone to see, and communities nationwide will band together to both adjust, and thrive, in this new world.