Covid-19 has continued to take its toll on the property industry and while there have been moments of normality, the pandemic is far from behind us. Property Week reports on the ups and downs of 2021.
The year got off to a bad start when news broke that Marco Fiori, joint owner and managing director of the iconic Fino’s wine bar in Mayfair, had died. Fino’s was established by Fiori’s father Serafino in 1971 and the wine bar quickly became one of the property industry’s most popular watering holes. In an interview with Property Week in 2012, Fiori said: “Apart from the odd exception, nearly everyone who comes in the place is from the property industry and our trading is a barometer of the market.”
This year, the industry also lost Inspired founder Martin Skinner, who died aged 42 in May; in August, John Miles, managing partner of the CWM Investment team, died at the age of 53; in October, Valerie Brecher, chairman of specialist West End real estate law firm Brecher, died aged 66; in the same month, former secretary of state for housing, communities and local government James Brokenshire died aged 53; and in November, Barton Willmore partner Robin Meakins passed away. Dentons partner Stephen Ashworth, who died in April, was posthumously named one of two personalities of the year at the RESI Awards, while UPP co-founder Sean O’Shea, who died in June, was one of two inducted into the Student Accommodation Hall of Fame.
We started 2021 talking about the Covid-19 pandemic, and the impact that restrictions and lockdowns were having on the property industry, and we ended the year talking about the pandemic and the impact newly tightened restrictions might have.
Nobody said it better than the late great Kenneth Williams: ‘Infamy, infamy, they’ve all got it in for me.’ But that phrase must have also passed the lips of a few landlords over the past months
Steve Norris, Property Week columnist, talking in March about the impact of government pandemic protections for tenants on landlords
Back in January, we reported that uncertainty caused by the pandemic had scuppered £250m of deals, but as things started to open up again, the market recovered strongly and many sectors are on track to post record years in terms of take-up and investment activity.
No, not the Covid or climate crisis: the crisis engulfing industry body RICS following the wrongful dismissal of four non-executive directors who raised concerns about the findings of an audit. Barely a week has gone by without another story about RICS breaking.
We kicked off the year with the front-page headline ‘RICS under fire’ and things deteriorated from there on in for the 153-year-old institution. In February, members expressed anger that RICS had chosen its own heads to lead a review into the body. It eventually backed down and selected Peter Oldham QC, who quit unexpectedly in April to be replaced by Alison Levitt QC.
Top 10 web stories on PropertyWeek.com
- Sean Tompkins to step down as RICS CEO
- Who owns Premier League stadiums?
- A right ruckus at RICS
- RICS holds crisis meeting with property bosses
- Former RICS directors break their silence
- Chair of RICS investigation resigns
- Savills pledges to investigate racist tweets
- CBRE unveils redeveloped London HQs
- RICS to hold crisis meeting tonight with property bosses
- RICS CEO hits back at critics
Sean Tompkins, RICS’ under-fire chief executive, came out fighting in an exclusive interview with Property Week in April, in which he defended decisions taken by the body’s senior leadership team. But a month later, he was on the back foot again as Property Week reported on members’ anger about his £264,000 bonus payment.
Levitt eventually published the findings of her review in a damning 400-page document in August, which ultimately led to the entire senior leadership team of Chris Brooke, Kath Fontana and Tompkins departing – the latter in September.
Last week, pressure was mounting on RICS once more, this time to explain what was in the redacted chapter of the Levitt Review.
The Lazarus effect
At the start of the year, experts warned that the retail sector faced a bleak 2021 – a year perhaps even worse than 2008, with potentially hundreds of distressed assets sold. In February, Property Week reported findings from the Local Data Company that showed there was an extra 15m sq ft of empty retail space on the UK’s high streets. And in June, we revealed that vacancy rates on Oxford Street had risen to 17%. Throw into the mix John Lewis announcing store closures and struggling bricks-and-mortar retailers Debenhams and Arcadia being bought out by Boohoo and ASOS respectively, leaving even more sizeable gaps on the nation’s high streets, and it is not hard to see why there was so much pessimism.
But although there were lots of distressed sales and the value of many retail assets slumped sharply, the dire predictions made at the start of the year thankfully never came to pass and as the months raced by, the sector showed strong signs of bouncing back, at least prior to the emergence of Omicron.
Exit stage left
Last year, the property industry saw lots of change in the leadership teams of the large developers in particular, but this year it was much quieter on the departures front. Having said that, Nick Walkley stepped down as Homes England chief executive in February – later in the year he took on a new role at Avison Young – and this month Taylor Wimpey chief executive Pete Redfern announced he was stepping down after more than 14 years in the role, a move that took many in the industry by surprise.
Going underground – and overground
Many people thought the industrial and logistics market was in bubble territory and that the bubble would burst this year, but it didn’t. Demand for industrial and logistics space continued to soar, with take-up and investment set to hit new records by the year-end and Amazon on track to exceed its own annual take-up record.
Greenwashing is a threat that we should all seek to challenge. It suffocates the flames of genuine sustainable innovation
Claudine Blamey, head of sustainability at Argent, talking in June about the property industry’s response to the climate crisis
Demand for stock was so hot that some developers were forced to explore new strategies. At the start of the year, news broke that SEGRO was seeking a subterranean City of London site and in October, Property Week reported on its plans to build a multi-storey shed with Berkeley Group’s St George in Brent. Expect to see similar moves next year and beyond.
A Property Week investigation in February revealed that local authorities across the UK had invested £820m in property via offshore trusts. The optics were not good and they didn’t get better in December when it was reported HMRC was about to sign the biggest letting deal of the year in Newcastle at a development that was registered overseas.
In March, a Property Week investigation also revealed that local authorities in London were sitting on a £1.29bn Community Infrastructure Levy and Section 106 cash stockpile.
The infamous ‘mound’
In February, Westminster City Council unveiled a £150m Westminster recovery package to help the area bounce back from the fallout from the pandemic. Around £2m of this cash was ringfenced to create a visitor attraction at Marble Arch, which entailed the construction of a 25m-high ‘hill’ from which tourists could pay to look out over the West End. The ‘Marble Arch Mound’ as it became known was an unmitigated disaster. Shortly after opening, it was forced to close and visitors were allowed to climb the mound for free. Ironically, the attraction was deemed so terrible it attracted hordes of visitors who wanted to see just how bad it was for themselves.
During the pandemic, some property firms suffered eye-watering losses due to tenants unable or unwilling to pay rents in addition to significant write-downs on the value of their property portfolios. This came to a head towards the end of May when British Land revealed a colossal £1bn loss for the year to the end of March.
West End landlord Shaftesbury posted losses of £338.5m for the six months to 31 March; Landsec and Great Portland Estates posted annual losses of £1.4bn and £202m respectively; and U&I reported a pre-tax loss of £86.7m.
Office deals were few and far between at the height of the pandemic and uncertainty surrounded what role, if any, they would play in the future as employees took to remote and/or hybrid working. But the office investment sector came back with a bang in late May/early June, when two deals worth more than £1bn completed.
Cashflow is king in PE, but property is a coveted ingredient in its alchemy
Alastair Stewart, equities analyst and consultant, writing in July about the wall of private equity money looking for a home in the property sector
First, Aldgate Developments sold BT’s new global HQ One Braham in the City to German investor Union Investment for more than €500m (£429m). A few days later, news broke that Brookfield was poised to acquire the 550,000 sq ft 30 Fenchurch Street (formerly Plantation Place) for a mooted £635m from trustees of the Safra family – representing a yield of around 4.5%.
The latter was the biggest office deal in London since the £1.1bn sale of the Citigroup tower in 2019. Martin Lay, Cushman & Wakefield’s head of central London offices, said at the time: “These transactions mark not just a terrific return in activity in the London market, from both domestic and overseas investors, but also show that pricing levels remain strong.”
One of the major talking points since the pandemic begun is what would happen to the billions of pounds of unpaid rent accrued during lockdowns thanks to the government introducing a commercial evictions ban. The moratorium was first extended to June this year, but the industry was taken aback when just before it was due to end the government announced it was extending it again, this time to 25 March 2022. The move was branded “crazy” by one senior property industry figure.
Bringing housing down
In March, former housing secretary Robert Jenrick unveiled a £5bn funding package to pay for the costs of removing cladding on buildings above six storeys, while leaseholders in medium- or low-rise blocks would be offered a low-interest loan scheme to pay for remediation works.
Part of the package, which Clive Betts, chair of the parliamentary housing, communities and local government committee, told Property Week was “a mess”, included a Residential Property Developer Tax, confirmed by chancellor Rishi Sunak in his autumn Budget. The tax will be introduced from April 2022 and form a targeted levy enforced at a rate of 4% on profits of more than £25m a year that arise from residential property development.
Critics argue the fund falls significantly short of the estimated £15bn cost of cladding remediation works and that SME housebuilders in particular could be negatively affected by the plans.
Most-read leader columns
Equally messy was Jenrick’s involvement in Richard Desmond’s Westferry Printworks scheme in east London. The scheme was initially rejected by Tower Hamlets planning officers due to not enough affordable homes being provided, but Jenrick called in the scheme and greenlit the 1,500-home project. It later emerged that Desmond had exchanged texts with Jenrick and donated £12,000 to the Conservative Party weeks after Jenrick’s approval.
The minister later quashed his decision and the scheme was refused permission in November, but many people believe Jenrick’s card was marked and it came as no real surprise when in a cabinet reshuffle in September he was cut from the front benches and replaced by Michael Gove in the new, bigger position of secretary of state for levelling up, housing and communities.
The property industry is jam-packed with personalities, but one person who stood out this year was Boxpark impresario Roger Wade. In addition to being vocal about the government’s handling of the pandemic and the impact it was having on the food and beverage sector, during the delayed Euro 2020 football tournament, which took place this summer, Wade was spotted revelling with fans at Boxpark Croydon, which also happens to be the Property Week team’s favourite after-work drinking hole.
Back in the room
Ballroom auctions failed to materialise in significant numbers this year due to Covid and the success of virtual auctions, but other industry events did take place in person. Mipim took place in September rather than its usual March slot.
Property Week hosted the RESI Convention in September in its usual slot. We also held our Property Awards and RESI Awards in November and December, and the Student Accommodation Conference and Awards in December. Everyone agreed it was good to be back but, as fears mounted over Omicron, wondered for how long.
The Collective pioneered the co-living concept in the UK and its charismatic founder Reza Merchant played a key role in driving awareness of the sector. However, the company raised the wrong kind of awareness in September when it was forced to call in the administrators, citing reduced occupancy levels caused by Covid.
The following month, Gravis Capital’s Asset Backed Income Fund – a lender to The Collective – completed a deal to buy six of the co-living brand’s assets.
At the end of the day, the agents and property managers are providing a service, but they’re not adding any value
Peter Bell, chief executive of the newly founded CTA speaking in October about the fraught relationship between tenants and the property industry
However, it appears the co-living concept is not dead. A number of developers and operators including Watkin Jones, Tiger Developments, Moda and Common unveiled plans for individual co-living schemes and/or ambitious expansion plans for the relatively nascent sector this year.
When Mark Allan took the reins at Landsec last year, industry experts watched the business closely to see whether or not it would change its strategic direction.
Not a great deal happened until November, when suddenly Allan showed his cards. First, he splashed the cash to buy struggling U+I for £190m – the developer’s first takeover deal for 20 years. Then, just a few days later, he snapped up a 75% stake in Salford’s MediaCity for £425.6m and agreed to buy Lendlease’s quarter stake in Bluewater – of which Landsec was already a significant shareholder – for £200m. It was a knock-down price for one of the UK’s best shopping centres, but the deal fits perfectly with Allan’s vision of backing mixed-use community developments as Landsec owns a significant chunk of land surrounding the centre on which it intends to build residential units and workspace.
The deals would seem to put paid to the idea of the creation of a ‘British Landsec’ – for the time being at least.
A lot of hot air was emitted by a lot of developers over the months leading up to the delayed COP26 climate change conference, which finally took place in Glasgow in November – a year after it was originally scheduled to be held.
However, at the event itself, the property industry was noticeable by its absence. While some property companies hosted events in the city to coincide with the conference, it seemed like a major missed opportunity for the industry to set down some markers – especially off the back of Property Week’s Climate Crisis Challenge campaign, in association with UKGBC, which has helped to raise awareness of the key issues affecting the sector and set out practical steps businesses should be taking now on the road to net zero carbon.
Back to the drawing board
The back-and-forth saga to build a 305m-high tower in the City of London alongside the Gherkin finally came to a head in November, when the recently formed Department for Levelling Up, Housing and Communities, overseen by Gove, rejected the planning application for the Tulip.
The building at 20 Bury Street, designed by Foster + Partners and backed by billionaire financier Jacob J Safra, was billed as a “public cultural attraction”, featuring an education facility at the top of the skyscraper, viewing galleries, sky bridges, internal glass slides and gondola pod rides on the building’s facade – in addition to shedloads of grade-A office space.
Experts believe the planning decision could be the final blow for the project. They also warned that Gove’s decision could be a sign of more difficult times to come for tall buildings in London.