Covid-19: Current views on a number of the UK’s commercial property sectors – April 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:
Recent weeks have seen the announcement of unprecedented stimulus measures, both in the UK and abroad, but volatility continues to haunt financial markets globally. This isn’t a repeat of the GFC, but it is too early to say what it is.
Investment markets:
Covid-19 disruption is yet to feed into overall UK volumes, but we expect that to change quickly in Q2 2020. Core income will remain in favour, and a deep understanding of local markets will be key to investors seeking opportunities in an uncertain market.
Occupational markets:
Corporate real estate strategies will have to evolve in response to Covid-19, but a nuanced picture will emerge at an industry sector level. In this new environment, we ask whether this can be the start of a new partnership between owners and occupiers.
London:
The numbers are clear: London, like many other gateway cities, has seen a quieter start to the year both for investment and occupational deals. But the city remains a safe-haven for investors, and enjoys an almost unrivalled level of amenity and experience that will remain a magnet for both occupiers and their employees alike.
Offices – UK Cities:
The market is more balanced than pre-GFC, with lower vacancy and a more modest development pipeline. Meanwhile, there is a growing sense that some businesses will be creating new jobs in the UK’s key cities to replace those that were previously moved offshore.
Retail:
There will be substantial occupier fallout as a result of Covid-19, but at this stage the scale is almost impossible to quantify. For now, the fight for survival trumps everything, but longer term, we question to what extent the crisis will actually prompt permanent changes to the way we shop.
Logistics:
Constraints on distribution are clear, as grocery stores and 3PLs, as well as the NHS and councils, have sought short term warehouse space to cope with increased infrastructure requirements. Scaling up will be a challenge, but longer term, the rationale for investor interest remains intact.
If you have any questions, our research team is always on hand to discuss any of these viewpoints in more detail.