Property Week’s Editor’s Dinner: Examining the property menu

Harvey Soning, chairman of James Andrew International, opened the event with a speech welcoming Lem Bingley, nine months into his role as editor. Both Soning and Dee Corsi, chief executive of fellow event sponsor the New West End Company, said the outlook for the market was broadly positive.

Most participants agreed that there were grounds for optimism. “For the first time in about eight years, bearing in mind my background in retail, I am quite positive,” enthused Phil Cann, UK head of investment properties at CBRE.

Cann cited chancellor Jeremy Hunt as a positive force for retail, and lauded the impact of “the rating revolution” on the sector. “The chancellor has been very helpful towards the retail and food and beverage sector,” Cann said. “The biggest change and positive movement in sentiment is around the rating revaluation, particularly for London, but it’s impactful for the whole UK retail market.”

He added: “You will see swathes of occupational costs removed from retailers, which has given them the confidence to sign leases. This is a dramatic change of events from six months ago.”

Commenting on retail trends, Marks & Spencer head of asset management Abhi Agarwalla drew a distinction between the fortunes of trolley- and basket-based stores. He said trading had become more buoyant in retail parks compared to high streets due to their convenience, with the ease of unloading from trolley to car amplified in out-of-town locations by the ability to avoid added costs such as clean air zones and congestion charges.

Corsi added that overseas shoppers were returning to the UK in numbers, particularly from the US, albeit at a lower rate compared with the rest of Europe. She rued the loss of VAT-free shopping for tourists, scrapped in 2020 by then-chancellor Rishi Sunak and set to be restored, for a fleeting period, by former chancellor Kwasi Kwarteng.

Lady Lucy French, chief executive of central London business improvement district (BID) Fleet Street Quarter, said the aftermath of the pandemic had given the retail sector a better understanding of its primary challenges. “The problem was happening well before Covid-19, but the pandemic has highlighted it. It’s given us an opportunity to pause and really rethink how cities work, how London works, and we’re still in the infancy of that thinking.”

French voiced the hope that collaboration between neighbouring BIDs in the capital,under the umbrella of the Opportunity London initiative, could help the sector.

“We’re living in a post-Brexit, post-pandemic world, and we’ve got to evolve. It’s a challenge but it’s also an opportunity, one we’ve got to embrace. I’m very much representing the city BID, and they have a huge voice in terms of how we make gold in this extraordinary new era.”

Property’s role in placemaking

French also urged the prime minister to give more resources to BIDs and to “recognise what they do for London and the wider economy”. She added: “We absolutely drive inward investment, growth, community, public realm and placemaking. If you look at the statistics, we’re a really important voice that’s in many ways overlooked.”

Bill Hughes, global head of real assets at Legal & General Investment Management, said owners in town centres and high streets had to “find a way of working together, by compulsion or by incentive”, with local authorities using compulsory purchase orders (CPOs) if necessary to provide the critical mass required to attract capital for regeneration projects. “Then we have a chance of preserving the amazing historical high streets that we have in the UK, because without that the continued demise is inevitable,” he argued.

Melanie Leech, chief executive of the British Property Federation, expressed similar sentiments saying local authorities should set ambitious goals for regeneration and then ask the private sector ‘Are you in or are you out?’, with CPOs used where necessary.

But former BPF chief Liz Peace highlighted recent legal challenges that had overturned CPOs, and said it might now take a very courageous local authority to use such powers.

L&G’s Hughes responded that the government needed to “empower and encourage that courage – without it, there will be dwindle and demise [in urban centres]”. But Soning added that a carrot-and-stick approach might prove less divisive, and more positive incentives were needed for businesses to come on board with regeneration schemes.

Government view

The experience of Brexit, Kwarteng’s failed mini-Budget and recent political instability had taken a toll, according to Hughes, with his company now “probably more worried than we ever have been about how other countries look at the UK”. He emphasised the “need to create an element of stability and predictability” and added that if this didn’t happen, capital would “go somewhere else”.

But nobody around the table argued when Leech stated that the property sector has image issues of its own to overcome, with a need to counter negative perceptions among politicians and the general public alike. “We need to be positioned as a provider of solutions to this government and to future ones,” she said.

You will see swathes of occupational costs removed from retailers, giving them the confidence to sign leases

Phil Cann

Hughes said organisations in the sector could do more to highlight their role as “guardians of the built environment”, adding: “We are thought of as being people who make money from owning things, but any government should see us as being a source of good.”

Leech added: “I’d like to say to this prime minister, and the next one, embrace the opportunity to work in partnership with the private sector to unlock our capital, ideas, energy, and ability to get things done.”

Rick Willmott, group chief executive of contractor and developer Willmott Dixon, said the industry must prepare now for what might lie beyond the next general election. “We all need to be influencing the next government – we need to be around [Keir] Starmer,” he said.

Net Zero challenges

The journey towards net zero carbon emissions was another key topic of debate among the dinner guests. Susan Freeman, partner at law firm Mishcon de Reya, said sustainability within the industry presented one of its most formidable hurdles and that it must drive its own pace of progress.

“There’s been very little legislation and we thought [decarbonisation] would be led by legislation,” she observed. “The change that’s needed is going to have to be led by the property sector. Just that, taken alone, is a very big challenge for us. We’re going to have to lead the way.”

CBRE’s Cann noted that the government had made faster progress on reforming the national approach to building safety than it had in setting the pace on climate change.

“We were talking a lot about the inconsistencies around the journey to net zero, which is challenging for people to understand outside of our industry,” he said. “Government has been looking at building safety post-Grenfell, and other horrible issues, and that interventionism seems to be working a lot more, and getting more column inches, than the drive to net zero.”

We are thought of as being people who make money from owning things, but any government should see us as a source of good

Bill Hughes

He added that demonstrable progress in the journey towards net zero could prove pivotal in attracting the next generation of professionals into the industry. “Property and real estate make up about 40% of the [UK’s] carbon footprint,” Cann said. “If we’re going to encourage young people to come into the industry, and they all want to talk about sustainability and the environment, then that’s how to drive it, not through bricks and mortar or the old, established routes of attracting surveyors and youngsters into property.

“If we get the messaging right about the journey to net zero and advisers that can advise and influence, then you’ll have a golden ticket for young people to be interested in real estate.”

Richard Rees, UK managing director of Savills, raised concerns around the “speed of obsolescence” regarding London offices and residential, due to tightening minimum energy performance regulations. He said government must not set arbitrary goals without understanding what their impact was on owners and occupiers.

“We are all grappling with it; it is a huge challenge to get the buildings we have to net zero,” he said, but he acknowledged that a failure to address the challenge risked the UK becoming “a very uncompetitive country”.

Hughes said the technology to upgrade energy efficiency was “largely there”, but warned of the huge skills gap that would add to the difficulty of delivering improvements. Many around the table agreed that there needed to be a programme of smaller incremental changes timetabled to make reaching net zero achievable by 2030, but that the government’s approach of making poor-performing properties unlettable might prove counterproductive. There was a feeling that the loss of property value brought about by sharp cut-offs could hamper efforts to fund improvements.

The social side to ESG

Paul O’Grady, location director for Grosvenor’s Belgravia estate, noted that to deliver on its commitments to environmental, social and governance (ESG) improvement, the industry must direct more focus towards social issues. “The S [in ESG] is in flux – there is no industry agreement on how we develop [it],”he said.

There was a consensus that the industry needs to work more closely together to achieve meaningful progress in becoming a recognised force for good in society, and to end the proliferation of different initiatives.

This was message that resonated across many of the areas discussed during the event, as Hughes summed up: “It’s been a really great evening for openness and displaying different opinions. We learned from each other. The ultimate point of this is to find a way of coming together around the important aspects of what we can do collectively to influence the future in a productive way.”