Forecast for 2021: looking ahead with hope (part 18)

Rob Cosslett

Deputy fund manager, Schroder UK Real Estate Fund

We expect the debate around the future of the office to continue. Despite the growing shift in remote working, we think this is likely to be a cyclical phenomenon and demand for good-quality office stock in big city centres, such as London and Manchester, as well as strong university towns and cities such as Cambridge, will recover in the long term, driven by growth in tech, life sciences and professional services.

We as a fund had already noticed this trend throughout 2020 after completing major office lettings to these types of occupiers at City Tower in Manchester and across our London sub-market assets at Ruskin Square in Croydon, Department W in Mile End, and Kensington Village in west London.

There have been positives from the Covid-19 pandemic, notably the improvement in air quality and the sharp increase in walking and cycling to the office.

This focus on sustainable living means that, aside from the already ongoing trend to cut overall building carbon emissions, more direct building upgrades will be demanded, including superb air-quality control systems and provision of cycle stores and electric vehicle charging points.

We have already taken major steps across our portfolio to upgrade the environmental credentials of our assets by installing bike storage and changing facilities, and we recently retained our 3* GRESB rating. We are also designing an all-electric energy strategy, rainwater harvesting, and a high-performance facade for 2 Ruskin Square in Croydon.

Bruce Dear

Head of London real estate and institutional investment, Eversheds Sutherland

Patience is a pandemic virtue. ‘Long 2020’ will last at least another 10 Covid-constrained months. Our real New Year’s Day will come around November.

Of course, things will improve before then. Vaccines will be rolled out, new investment will flow and the economy reopen. But history speaks in broken sentences, not smooth rhymes and it will do a lot of talking in 2021. Whatever it says, be optimistic: downturns make new markets and opportunities.

H1 will bring recession’s traditional pain and opportunity: insolvencies, portfolio restructurings and voids. Investors will throw their dry powder into these roiling waters, fishing for mispricing, real asset value in obsolete companies and dominance in tomorrow’s property market.

That ‘cyborg’ market (part online, part human, part robot) will be dominated by residential, logistics, tech, health, infrastructure and regeneration.

Offices are not dead, only sleeping. There will be more blended office models with more home working but also an initial stampede back in looking for ‘normal’. Landlords should react to this blended world by creating high-specification, multi-service offices where teams can thrive.

Retailers must reinvent themselves as leaner, omni-channel animals, strong in fulfilment and online. Optimism drives real estate. In 2021, our market must bounce back to build a better future.