Looking at the year to come, Covid will remain the biggest driver of change in Scottish real estate. Climate change is having an influence as is ESG, but the pandemic’s impact on daily life is inevitably having an effect on property.
One of the more direct impacts of Covid is on our office spaces. In 2021, employers invested in making their offices more enticing places to work. One example was KPMG in Norway, which went so far as to enable employees to alter their set-up in the office so that they could, ironically, feel more at home. Office workers will continue to want to work from home this year, so employers will need to find ways to make offices worth commuting to.
But the actual building a person works in is also likely to impact who people choose to work for depending on its environmental impact, as the climate crisis becomes increasingly important to people’s values.
Leading on quality will reap rewards in a buoyant purpose-built student accommodation (PBSA) sector. The PBSA market remains a resilient and very attractive asset class at the right level. It is so driven by quality that those PBSAs with good investment in the building and operational excellence will thrive.
While many expect to see investment activity in new-build PBSA portfolios, I think the more likely trend will be investment in tired and outdated stock. With the help of private sector developers, older buildings could be refocused to target the mid- to high-end of the market where demand currently outstrips supply.
While on the topic of living, a supply and demand imbalance coupled with political will for more homes has led to tremendous activity across all areas, from housebuilding to build-to-rent.
For a long time, the commercial residential market has led the way on sustainability. Zero carbon, sustainable construction and lower energy costs combine to sell houses, even if the costs of achieving these ideals are not always capable of being passed down from housebuilders to homeowners.
We can also expect greater investment in high-quality experiential leisure and retail spaces. I recently enjoyed a tour of Diageo’s new Johnnie Walker visitor attraction in Edinburgh on Princes Street and was taken with the all-round excellence of the overall experience. This is indicative of what I expect will be a more lasting trend: retail and leisure spaces need to provide people with rewarding experiences. Those spaces that are designed to provide a heightened customer experience, coupled with good service, will thrive.
Jonathan Seddon is a partner and head of real estate at independent Scottish law firm Morton Fraser
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