After two years of unprecedented challenges faced by real estate, experts share their predictions for 2022.
Managing director, Patron Capital
We made great headway with economic recovery in 2021, but the story of 2022 will be about how we keep that recovery on track. To that end, my hope is that the vaccination programme continues to be successful and effective against Omicron and future variants. This is crucial to maintaining consumer confidence, which is what underpins economic performance and the performance of real assets more generally.
From a real estate perspective, most asset classes are undersupplied, with the exception of retail and lower-quality offices. I think there will be a continued evolution towards grade-A properties and tenant demand for best-in-class offices is returning. While nobody knows what will happen with retail, I think the worst has happened, so the future is about how the sector will adapt, change and, maybe, recover.
Chief executive, Rentplus
Contrary to the government’s aim of turning ‘generation rent’ into ‘generation buy’, 2021 was characterised by spiralling house prices and a widening affordability gap. With public funds under pressure, the only way to deliver the affordable homes we so urgently need is through institutional investment.
Our hope for 2022 is that government gives more active support to alternative, privately funded housing tenures – such as rent-to-buy. We need a framework to which providers can refer, confirming national-level support for these schemes and instilling confidence to accept alternative housing provision outside of government grants.
In 2021, Rentplus UK’s first tenants moved from being renters to homeowners, buying 100% of their own home, with a 10% gifted sum, having moved in with zero deposit five years ago. In 2022, we’ll bring this opportunity to many more across the country, all at no cost to the taxpayer.
Deputy chief executive, Hill Group
Last year highlighted the importance of the residential market in the recovery of the British economy, and I’m confident activity and demand will remain high as people prioritise their need for housing this year. New opportunities will lie within the environmental agenda, as the government and buyers prioritise the need to futureproof new homes. We are strong advocates of this step change, having introduced a wide range of sustainable features across our developments.
The year ahead will also bring challenges, particularly in planning, due to a lack of resources, increased legislation and a sharper political focus, which need addressing to ensure viable developments are delivered on time to provide much-needed housing. At Hill, we will continue to deliver the needs of our partners and customers while looking for new opportunities to provide transformative new homes and communities across the country.
The bifurcation of the office market will continue as the gap between ‘the best’ and ‘the rest’ widens, fuelled by tightening ESG requirements and spaces designed with flexibility in mind and that can accommodate hybrid working. We need to rise to the challenge of delivering sustainable assets that meet not only increasingly stringent criteria for occupiers and investors, but also our collective responsibility to help the environment.
To do this, then we need the planning system to work as a facilitator, rather than a regulator, and for planners to be more creative in their policy and thinking. I also hope people return to urban areas in a meaningful way.
Executive director, portfolio management, development and ESG, Get Living
Last year presented us with the opportunity to leverage COP26 and make major strides on ESG, with businesses taking climate change seriously and focusing on solutions. In 2022, it is important that we walk the walk and not just talk the talk. We all see there is, and should be, industry reputational risk from inaction. The fiscal consequences are real as the world of finance aligns reward to climate leadership.
Sustainability will become vital in brand value and at Get Living, we are seeking opportunities to embed meaningful ESG principles into the DNA of our business. Curiosity may serve us well.
I anticipate we can take inspiration from outside real estate. For example, what could we learn from the sustainable fashion movement, which has embraced more sustainable materials and processes? Get Living will strive to deliver our neighbourhood pipeline and grow our business in line with our sustainability values, which we know resonate with customers, colleagues and all our partners.
Investec Real Estate
Our view is that inflation will stay elevated for much of the year because the issues triggering price rises and pay rises will not go away quickly. Consumer prices index inflation of 5.1%, combined with shortages of new-build homes, could lead to similar house price inflation as 2021 in some parts of the UK in 2022, meaning demand for renting will grow at the same time.
The Bank of England, however, is likely to be reluctant to announce anything other than small, incremental interest rate rises, and we doubt rates will be above 1% by the end of the year. We do not anticipate loan-to-value ratios for well-let investment properties and good development prospects rising above their current 60% to 65%, but we do believe some lenders will become more selective about which sectors they support. And above all, green finance will be the key focus in lending in 2022.
Managing partner, Cluttons
This will be the year of ESG, connectivity and collaboration. On the ESG front, businesses will start placing real values against sustainable property. They have to – impending legislation targets in areas such as EPCs demand it. Moreover, they should do so because talent, tenants and consumers are driving the climate change agenda more than ever.
On retrofitting, we’ll see a bigger focus for both homeowners and commercial landlords on how to improve their properties’ EPC ratings. We may see increased take-up of government subsidies for 90,000 ground source heat pumps, but this is not likely to be widespread among those on smaller incomes and much more likely to benefit the middle class who can already afford new boilers.
As a company that works closely with charities, we expect to see more divesting of office space by the sector in 2022 and perhaps more investment in property that can drive value and income as part of an overall business strategy. We also think that charities that own a large portfolio of property will look at retrofitting and sustainability measures far more closely.
Managing director of asset management, Grosvenor Britain & Ireland
We should look beyond the ups and downs of the pandemic, as tough as that may be, instead focusing on three things as the recovery builds: collaboration; decisiveness; and timeliness.
Successful assets and operators will be those that recognise there is mutual benefit to be gained by making every effort to understand one another’s needs. The same applies to wider stakeholder relationships, internally and externally. Together is definitely stronger.
Decisiveness is important because hesitation rarely makes for a better outcome. Last of all is acting on decisions in a timely manner, with due consideration to being thorough. There is little point in agreeing a course of action if it takes an age to mobilise. While there may yet be more challenges ahead, I am confident collaboration, decisiveness and timeliness will see us through.
Continue to part 49 here
Predictions for 2022: Brace yourself…
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Predictions for 2022: Brace yourself (part forty-eight)
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