Covid-19: Current views on a number of the UK’s commercial property sectors – May 2020
What we know, what we expect, what we question.
2 minutes to read
This insights note focuses around what we understand with relative certainty, some of our current expectations, and some of the questions we feel are relevant in the current market.
Knowledge of the pandemic and its market impact is expanding daily (captured by our Daily Dashboard) and our expectations are continually evolving. But while it is still too soon to make absolute judgements about the eventual impact on markets, we can usefully pose some of the most pertinent questions.
In the downloadable report, we set out our thoughts on the key areas below: macro background, investment and occupier markets, London offices, UK offices, retail and logistics.
Macro trends: Unlocking the Lockdowns
Containment strategies were always likely to result in dramatic falls in growth rates. Amidst intense debate over the shape of recovery, the recent relaxation of some measures has sparked a return of greater optimism, but our sense is that this remains a gradual process.
Investment markets: Short Term Challenges, Long Term Demand
After a strong first quarter, the practical challenges of investing will bring volumes down with a bump in Q2. Looking ahead, we continue to see strong demand for assets with certain characteristics, albeit with much greater selectivity amongst investors.
Occupational markets: The Great Workplace Experiment
For now, occupational markets are largely on pause as business confidence diminishes. Longer term, we envisage a growing challenge to the binary distinction between working from home and working in the office, and question whether office densification has run its course.
London: Activity Starting to Slow
As market activity eases, we look to flexible office space as one beneficiary of the recovery phase, and question the belief that rents on all grades of office will necessarily see material falls.
Offices – UK Cities: Adapting to a New Normal
Our analysis shows Q1 leasing down by circa 10%, and that development has begun to slow. As the markets evolve, we question the potential demand created by onshoring, and the possibilities offered by first class digital infrastructure.
Retail: The Fallout from Lockdown
A sharp decline in consumer spending is feeding directly through to landlords, with just one third or tenants fully meeting Q1 rent obligations. As the lockdown continues, we question the speed of recovery, and the extent to which consumer behaviours have changed for good.
Industrial Warehousing: A Race for Space?
A lack of available warehouse space in the face of Covid-19 restrictions is reaching a critical point, and our analysis points to an immediate need for up to 5.5m sq ft of short term space.
If you have any questions, our research team is always on hand to discuss any of these viewpoints in more detail.