Five transformative trends for UK real estate in 2021

Dr Tim Moonen, Co-Founder of The Business of Cities says: “Cities have been associated with health risks over the last 12 months but that will start to shift the other way.”

All property types will need to adapt with the end-user in mind, to deliver an experience rather than simply a functional space.

In retail, physical stores will still have a place but it will be a year of reinvention, whether rethinking the customer experience or a change of use.

In the housing sector, the desire for more space will lead to more families and older people moving from cities to suburbs. City centres will therefore need to work harder to keep people coming back through a varied range of high-quality leisure attractions and workspaces that justify the commute.

Investment volumes will also rely on uplift in corporate and debt deals, more joint ventures and more public-private partnerships.

Investors will move away from single sector strategies towards mixed-use assets and they will work closely with occupiers to create more flexible and sustainable real estate.

3. Retail will be repurposed

The retail sector is arguably the biggest property casualty of the pandemic, yet the retail investment market will offer some of the most interesting opportunities in 2021.

The repurposing of empty stores on high streets and retail parks into homes and city logistics hubs is at the top of the agenda with 40,000 vacant retail units across the UK, a number expected to double by 2026.

“Repurposing this obsolete stock will unlock space for these growth sectors and right-size our industry to better serve future cities and workforces,” says Neale.

Public-private partnerships are likely to facilitate some repurposing projects and investors with ESG (environmental, social and corporate governance) objectives will seek opportunities to reinvent space in a more sustainable way.

Demand will largely centre on London and the South East along with tier one and two university towns and cities.

4. Workplaces will evolve to meet employee expectations

As people have become accustomed to more flexible ways of working, their expectations for the workplace have changed.

Emma Cariaga, Joint Head of Canada Water Development at British Land says: “Homeworking has been ok functionally but we’re all left wanting and will want to come back to the office. People will want to be persuaded back into the work environment and it needs to be of utmost quality.”

As employees return to the office for at least part of the working week, hygiene and safety will remain top of mind. Workplace design needs to focus on amenities and workspaces that genuinely add value, enable collaboration and build communities.

A JLL survey last year highlighted the rising demand for smart, sustainable and healthy buildings: 49 percent of CRE leaders said that health and wellness of employees was their top priority.

Such upgrades will come with significant cost implications and it’s likely that investors and developers, who will reap the higher rents that those exceptional assets could command, will foot the bill.

5. Sustainability is no longer optional

The government has made it clear that sustainability is a domestic priority in the UK and with COP26 taking place in Glasgow later this year, the focus will only increase.

“Sustainability needs to influence every decision if we want to meet some stretch targets set for the sector,” says Emma Hoskyn, head of sustainable client solutions at JLL.

Increased analysis of climate change risks and a growing understanding of the investment required to get buildings to net zero carbon are likely to result in some ‘stranded assets’.

Buildings with high sustainability credentials can attain a 6-11 percent rental premium over comparable buildings, according to JLL.

“Investors increasingly take an asset’s sustainability credentials into account and the research shows a rental premium. Why wouldn’t investors move in that direction?” adds Hoskyn.