After two years of unprecedented challenges faced by real estate, experts share their predictions for 2022.
Director and co-founder, Avamore Capital
This year brings us into our third year of the pandemic. Expect society to become accustomed to living with the virus and for a more ‘normal’ year, with the odd bump in the road. From a resi standpoint, we are now in late-cycle territory. LTVs will continue to creep up and lender margins in the first half of 2022 will remain under pressure.
Affordability has been stretched to the point that 50-year mortgages are being mooted by lenders. Notwithstanding, it is hard to see on a national level house prices rising significantly. In the same vein, inflation giveth and taketh away.
While boosting wage growth, it will force the Bank of England’s hand and lead to interest rate rises, taking away any increased purchasing power from buyers. Nevertheless, the government, conscious of an election in 2023 or 2024 will put pressure on the BoE to relax mortgage lenders’ criteria to help first-time buyers.
Chief executive, McKay Securities
As we begin 2022, Omicron has been a salutary reminder that we are living a new normal, but as an industry I hope we can have sound confidence in our resilience after an immensely challenging period – the office’s purpose has been proven, while demand for warehouse stock shows no sign of abating.
However, I expect we’ll increasingly see the best-quality stock with strong ESG credentials capture future demand, placing a sharper focus on the relationship between building quality and maximising portfolio potential.
Additionally, I suspect there will be a continuation of certain office trends that have become more pronounced by Covid-19 such as: decentralisation towards locations that can offer lower occupational costs, flexible transport options and generous car parking; shorter-term and more flexible lease structures; and pre-fitted-out spaces that can facilitate increased mobility.
Sadly, 2022 is likely to provide more evidence of the global climate crisis, adding to the challenges for future generations. As a society, and an industry, I hope we can be more conscious of the pressures on the young; they are our future and require proper in-person professional guidance and nurturing to thrive.
Chief executive, Central District Alliance
The opening of the Elizabeth line this year will have a transformational effect on London. It will bring London closer to 1.5 million people, cutting journey times to less than 45 minutes, making the capital even more connected and easier to reach from all corners of the UK and the world.
Although much delayed, the start of services will provide a much-needed boost to London at a critical time, supporting the post-pandemic recovery by driving more investment into the capital and making it easier for domestic and international tourists to visit.
It will also drive further growth in our thriving occupier community across the Central District Alliance area of Bloomsbury, Holborn, St Giles, Clerkenwell and Farringdon. Transport infrastructure is the fuel that powers cities – this is why we will continue to lobby central government to adequately fund infrastructure, now and in the future.
Chief executive, Aprirose
In 2022, we will see investment in industrial and residential property continuing to boom as the 65% of institutional real estate capital that previously went into office and retail (according to 2019 figures) needs a new home. This is where investors feel safe given lingering Covid uncertainty.
Rental growth remains strong due to online trends and inflation. In particular, wage inflation in lower-income employment is hitting unprecedented levels, combined with limited new build coming through, driving particularly high rental growth in the private affordable housing sector.
Post Omicron, pent-up demand for UK leisure and hospitality is expected to continue to rebound strongly. Regional revenue per available room in 2021 was already above 2019 and – if we successfully navigate future outbreaks – this will continue. New and interesting concepts are emerging, with hotels that blend F&B, lifestyle, culture and wellness providing experiential stays that capture the zeitgeist.
International travel will rebound less strongly and city centre hotels will reposition themselves to capture leisure spend.
Continue to part 16 here
Predictions for 2022: Brace yourself…
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Predictions for 2022: Brace yourself (part fifteen)
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