After two years of unprecedented challenges faced by real estate, experts share their predictions for 2022.
MD, HKS Architects London
Our changing routines and the growth of online technology mean town centres will continue to evolve next year. This presents an exciting opportunity for our sector to shape how a new make-up of businesses and services can create healthy and commercially viable high streets of the future. We’re already working with a number of clients on creative alternative uses for existing retail and office space, including converting them into digital immersive venues, diagnostic health centres, and further education facilities. Repurposing these premises is far more sustainable, supports the ESG goals of investors, diversifies portfolios, and potentially increases footfall to remaining retail outlets.
Co-founder, March and White Design
2022 will be the year hospitality becomes a major part of office development design. This has been a growing theme, with more and more developers dedicating a significant part of their buildings to amenities in recent years, and the Covid crisis accelerated it. We believe that not only will office tenants be looking for higher quality, larger spaces than they were pre-Covid, but also that they will want a significant percentage of that square footage to be dedicated to amenities that bring real value-add to their corporate culture. However, enticing staff back to the office will require more than flashy neon lights, fancy coffee bars and the obligatory ping pong table. These spaces will need to be designed using hospitality-based principles of guest experience, demonstrating a real understanding of the people that make the company. The challenge will be to create amenities that are flexible, but custom-designed for their specific users.
CEO & co-founder, Bricklane
Recent build-to-rent announcements from L&G and Goldman provide further evidence of the arrival of single-family residential in the UK. However, build-to-rent merely represents a rounding error in the massively successful US SFR market, where institutional investment in granular residential properties has scaled from $0 to over $50bn in the past decade. As demand for residential returns collides with construction constraints, we expect tech-enabled SFR investment in individual existing granular properties to accelerate at pace, creating a professionalised rental market that offers superior returns for investors and a high-quality service for tenants. Alongside this, we expect to see growing momentum behind retrofitting as a means of improving carbon efficiency. In addition to the carbon cost of construction and demolition, relying on new builds to make UK housing stock more energy efficient will take 50-100 years. The rise of institutional SFR in existing granular properties can significantly accelerate this change.
We expected to see a Covid-related correction in 2021. However, the reality is that the property market continued to move from strength to strength, supported by a host of positive public sector initiatives on funding, the levelling up agenda and investment in core infrastructure. Our sales are up due to exceptional demand both domestic and overseas. We foresee this continuing in 2022 as we see the return of liveliness to our town and city centres. Any instability will likely bring an equal amount of opportunities. There will be challenges and headwinds. Build cost inflation is something that in particular we need to manage carefully. The key is to buy sensibly and to manage the cost to maximise the value while not compromising on quality. This is a year to be bold in decision making and to take advantage of opportunities as they present themselves.
It has been a seller’s market and it’s no secret that auction services have benefitted from that as more and more consumers consider different methods of sale, aligned to their individual circumstances. Agents, buyers and sellers have naturally gravitated towards the benefits of the ‘modern method of auction’ (MMoA) – speed, security and a transparent online process that supported them to continue to sell houses, first through lockdown and secondly, when private treaty timescales hit record highs last year. As we move into 2022, the challenge for agents will be to differentiate themselves from the competition. Stock is likely to remain low and winning instructions will be more difficult. Adopting tech and alternative methods of sale that work in these types of conditions, and give consumers choice, can be that silver bullet for agents.
Chief revenue officer, Forbury
There is real hope that 2022 will be the year that the real estate sector finally grasps the nettle on valuations. There is growing disquiet about the accuracy of assessments – accelerated by the shifting dynamics of the last two years – and increasing calls to embrace discounted cashflow valuations. It will be particularly interesting to see how the sector responds to the conclusions of Peter Pereira Gray’s review of investment valuations for the RICS. Our software incorporates discounted cashflow because it improves accuracy, and ultimately it is client demand for greater insight that will drive real change across the industry. Away from valuations, I think we all hope that the light at the end of the Covid-19 tunnel proves to be real and not a mirage. There will be bumpy times ahead, but we are in a much more encouraging place than a year ago.
To help landowners realise new value from their existing portfolio, by building up, not out. Housing associations and local authorities across London are looking for airspace development opportunities to tally more homes, faster, against their delivery targets. COP and Covid will be on our minds in 2022, influencing how we set our budgets. Landowners are looking for intelligent ways to remove the cost of land acquisition, slash the cost of capital works, and finance retrofit. One important lever that only government can pull — and must, if it wants to be remembered as climate-progressive — is to reduce VAT on refurbishment to the same level as new builds.
Director, Turkey Mill Business Park
I believe that 2022 will see confidence returning to sectors of the market where there has been considerable speculation of their imminent decline. After a long period of working from home we believe that it has been much easier for employers to persuade the local working population back to work involving a short commute by car, rather than a long train and tube journey, coupled with the extra expense. As the problems posed by Covid recede that the emphasis on ESG will grow such that the property industry will have to actively respond. Despite the original part of our estate being Grade-II listed we have been refurbishing offices to achieve EPC ratings of C, while we are about to install our first communal electric charging points. With the River Len running through the estate we are investigating converting a redundant turbine to generate hydro-electricity. We start 2022 in an optimistic frame of mind.
Predictions for 2022: Brace yourself…
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Predictions for 2022: Brace yourself (part forty-four)