After two years of unprecedented challenges faced by real estate, experts share their predictions for 2022.
Chief executive, Urban&Civic
It is tough to feel too cheerful when our industry loses two architectural giants: first Chris Wilkinson and now Richard Rogers. Omicron obviously does not help either, but mass booster vaccinations will substantially limit another run on the NHS. Lest we forget, the early pessimistic Covid prognoses had UK unemployment peaking at anything up to 10% when around 4% is looking a better estimate for the first quarter of 2022.
Against that background, fervent hopes for this year are the diametric opposite of my current expectations. My first hope is that current inflationary cost pressures prove a pass through. Keep in mind that a ferocious recent stacking of the sovereign debt mountain motivates international policymakers to talk down structural cost pressures for fear of provoking interest rate rises that domestic governments can scarcely afford. Closer to home, shortages in labour and materials will continue to put pressure on housebuilder margins. Meanwhile, house prices look set to trend down as the rate of growth falls below headline RPI.
My second hope is that local authorities and statutory agencies stop using Covid as an excuse for the palpable decline in administrative services. The whole public system requires re-engagement and a sharp influx of motivation. Good luck to the rest of us with that.
Director, SladesCo; chairman, Duff & Phelps Real Estate; and senior adviser, Allianz
On the logistics front, I see demand for investment continuing and, quite unbelievably, pricing will continue to harden. The level of demand caused by online retail, sector under-weighting in investment portfolios and the strength of covenant of some of the new tech players, together with the lack of supply, particularly for last-minute/last-mile, will underwrite values all the way from the intrinsic site value to the finished investment product.
My work with major institutional investors tells me that ESG will jump back to the top of the list in 2022 not just in terms of good intentions, but in practice and reality. Life science investments (which were barely on the agenda five years ago) will increasingly take centre stage in 2022, and not just because of the ‘usual big players’. Others, buoyed by the realisation that climate change is real and the ongoing pandemic, will enter the market.
My final prediction is that the very best of central London prime offices will continue to perform as there will be a flight to quality for large firms that want to attract talent, ensure their brand is represented and bring people back to the office even if it is only for part of the working week.
Chief executive, Shaftesbury
It is my hope that 2022 will see a continuation of the rapid recovery in confidence and activity we have seen since early summer 2021, aided by a successful and effective vaccine booster programme. Since July last year, we have seen a remarkable bounceback in footfall and trading across Carnaby, Soho, Seven Dials, Chinatown and Fitzrovia, and a dramatic recovery in commercial and residential leasing activity.
While it is clear right now that there is still a way to go before life returns to its pre-pandemic norms, I am optimistic that through the unique and enduring appeal of our central West End locations and working in collaboration with our neighbours and other stakeholders, we will see a sustained return to growth and prosperity for all our occupiers, and the thousands they employ.
Despite the unprecedented challenges of the last two years, the West End will continue to attract businesses, talent, innovation and visitors on a scale matched by few other destinations across the globe, which together will underpin both its long-term dynamism and resilience and the prospects for our exceptional portfolio.
Chief executive, Helios
Developers looking to build out their schemes are facing a challenging year with supply chain chaos and contractors unable to commit to fixed prices. Inflation is rampant in our industry and is unpredictable. Materials and labour availability are issues. Tradesmen can command twice the average wage of qualified architects and are picking and choosing their projects.
The government’s attempts to build its way out of trouble add fuel to the inflationary fire. My hope is we learn from this and forge better relationships with our contractors and that they do the same with their suppliers and subcontractors. I’d also like increased support for apprenticeship schemes across the industry. Development has never been easy but finding sites, tenants and funding used to be the tricky bit. It’s starting to look like the easy part now. Let’s hope what we are experiencing is an inflationary spike and not a trend.
Continue to part five here
Predictions for 2022: Brace yourself…
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Predictions for 2022: Brace yourself (part four)
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