UK Cities DNA | Don't stop thinking about tomorrow
Real estate is at the heart of the solutions to many of the UK’s current challenges, creating a generational opportunity for the sector.
3 minutes to read
- The UK is currently experiencing a significant economic revival, with both recent and future growth projections being upgraded.
- The UK’s position relative to other countries has improved: growth upgrades come at a time when other major economies are faltering, while the stable political transition contrasts with ongoing uncertainty and flux in large democracies around the world.
- In common with other developed economies, the UK faces several significant structural and social challenges.
- Far from being a separate consideration, real estate is at the heart of the solutions to many of the UK’s current challenges, creating a generational opportunity for the sector.
A new dawn?
If one takes the global financial crisis as a logical turning point, the UK is approaching almost two decades of major structural change. The size, composition, society, politics, and global positioning of the UK has evolved dramatically during this time, and yet there is nothing to suggest that the next 20 years will be any less transformational. While some change will be instigated at home, and unique to the UK, many of the triggers will be global in scale – from geopolitics to technology, from demographics to climate change.
Despite these challenges, the UK’s position remains strong. It is a leading global economy, driven by deep financial markets, a top-tier education system, and a reputation for innovation and talent attraction. Additionally, the UK's influence extends through its cultural and diplomatic reach, maintaining strong international relevance. However, the UK faces familiar issues: housing shortages, economic imbalances, and dependency on services. As economic growth moderates, central banks remain cautious about lowering interest rates, and governments have limited fiscal space after pandemic-era spending. Regional disparities and low productivity growth also pose specific challenges for the UK's future.
Real estate’s critical role in the revival
Real estate will play a pivotal role in addressing the UK’s economic challenges, driving growth, and supporting the country’s recovery. There are at least five important elements that make up this case.
- A little bit of luck
UK economic growth has outperformed expectations, with it’s H1 24 performance the strongest in the G7, driven by strong population growth and a recovery in consumer sentiment. 2023 ONS figures show population growth in England and Wales at it’s highest level for 75 years. As the UK continues to grow, the need for housing, healthcare, and infrastructure intensifies, presenting an opportunity for investment in real estate and sustainable infrastructure to support this expanding population.
- Ideas: the consolation of stagnation?
One part of the economy that has remained in robust shape is that of idea generation. Only the US, China and India have more thank-tanks than the UK, and along with industry bodies, universities, regulators and government departments, these organisations have turned their attention to a vast array of policy challenges. Real estate can benefit from the innovative policy solutions these institutions develop, ensuring the sector remains responsive to evolving regulatory, economic, and societal needs, while enhancing the UK's global standing.
- Investment nationalism: co-opting the private sector
With limited public funds, the UK is turning to the private sector to drive infrastructure growth. Aligning public and private interests can unlock significant real estate investment, while initiatives to attract domestic capital back into the UK offer new opportunities for long-term growth in housing, commercial property, and infrastructure projects.
- Picking winners
The government’s industrial strategy, though modest, highlights sectors where the UK excels, including technology, finance, and life sciences. These sectors create demand for modern, flexible office spaces and innovation hubs, presenting a clear role for real estate in supporting growth and ensuring the UK remains competitive in these critical industries.
- Why the UK?
The UK remains an attractive destination for investors, businesses, and talent due to its stability and improving economic outlook. As uncertainty rises in other major economies, notably the spread between French and German 10 year bond yield grew by 30bps at the point of peak French election fever, the UK’s political and economic environment offers a safe haven, reinforcing demand for real estate across commercial, residential, and infrastructure sectors.
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