The world we live in is increasingly interconnected, and, as a result, the ripple effects of major innovations and events can be felt in distant places.
At AECOM, last month we completed the joining of another global consultant, URS, with us to form a combined company of almost 100,000 employees in more than 150 countries with presence on all seven continents. The combination has created one of the world’s largest design, engineering and construction companies, with an ability to finance as well as manage and operate assets.
At the same time, many developer clients such as Knight Dragon and Qatari Diar have grown global operations building mixed-use schemes in multiple locations around the world. Borders are breaking down and cross-geography collaboration is now the norm. When it comes to the property market, which is increasingly characterised by the flow of international investors, developers and ideas, we are in an ideal position to identify global trends early and act on them. Our specialists around the world use their expertise to deliver that perspective to any market.
Drawing on our experience, here are some thoughts about future property trends:
Residential: fewer overseas buyers in the UK?
As we have seen in the past couple of years, particularly in London, global investors have been major residential property buyers. However, with political pressure mounting, the government is seeking ways to balance the costs and benefits of this investment. Capital gains tax will be introduced in April 2015 on profit generated by non-UK residents selling UK residential properties.
It remains to be seen how this tax will impact the non-domiciled homeowner market. However, international buyers do seem to be retreating from the capital. According to Knight Frank, sales to non-UK residents slipped from 73% in 2012, to 63% in 2013, and further still to 47% during the first half of 2014. With macro-economic risks fading, the pound following a steady pattern of appreciation and cheap property being available on the continent, the appeal of London to this group of buyers is beginning to wane.
Commercial: office need in the US and UK
Questions are being raised around the offshore workforce business model. With rising wages and the rapid expansion of the middle classes in developing economies, perhaps it is cheaper to bring outsourced work back home?
In 2009, 1.8 billion people were middle class; however, by 2020 this figure is expected to reach 3.2 billion. Meanwhile, wage inflation in China has risen by 15%-20% per annum over the past few years, increasing employers’ labour costs. In addition, unemployment rates in developing countries have increased in the past couple of years. A survey in August suggested that 54% of US manufacturing businesses were seriously considering or fully intending to bring home production from China. Will the UK follow suit?
Leisure and culture: offering more and better
The leisure market is ferociously competitive - destinations compete on a global scale and travellers are demanding ever-higher standards of hospitality. The Chinese, for example, are representative of the biggest force in global tourism today. However, despite knowing that the average Chinese tourist spends four times as much as the average visitor, UK-specific visa costs and restrictions can put many off visiting. For every 1% increase in the cost of visiting the UK, the country’s tourism earnings slip by 1.3%. At the same time, the hotel industry is keeping a close watch on upstarts like Airbnb, which are drawing away business from the budget hotels sector.
These three property trends will have far-reaching implications for developers and landlords of all types. Buildings are inanimate objects, but real estate is rapidly becoming a global, inter-connected world.
Steve Morriss is chief executive, EMEA at AECOM.