UK Real Estate Horizon Scanning 2021

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In August 2020, the Government published its much anticipated “Planning for the Future” white paper setting out its high level proposals for a complete overhaul of the UK planning system. Generally speaking, the purpose of a white paper is to provide a basis for consultation and discussion with various stakeholders following which the Government can hone its proposals with a view to publishing detailed legislation at a later date. The white paper offers much food for thought however the Government has already found itself facing fierce criticism, especially when it comes to the delivery of affordable housing (covered in more detail elsewhere in this publication), which many in the industry believe will be hampered by the proposals. This is at a time when delivery of this asset class is arguably needed the most and institutional investors’ appetite for affordable housing has never been greater.

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London – and the City of London in particular – has long been a significant node in the network of global trade. It helped pioneer the disembodied marketplace, where goods change hands without being physically present. The Metal Exchange is no more ferrous than the Baltic Exchange is wet. Traders themselves, however, were always physically present along with the lawyers, accountants and taverners who served them and this diversity of commonalities has made the City of London what it is today. The pandemic changed this. It has accelerated a move away from 'big business' meaning big buildings. This presents a potential problem for a commercial and financial hub like the City of London and the real estate investment market in particular. Core City assets have been perceived as a safe bet for decades. Is this about to change?

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When it comes to existing and emerging asset classes in the Real Estate sector, there have been some clear winners and losers resulting from the events of the last year. Arguably the pandemic has simply acted as a catalyst for changes anticipated by many for some time, but doubtless it has played to the strengths and preyed on the weaknesses of particular uses on an extreme level that we wouldn’t otherwise have witnessed. Even more so in times of global economic uncertainty, investors seek out opportunities that deliver stable rental growth and there are clear signs that this will involve turning their backs on some of the sectors that have thrived in previous decades.

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2020 has shifted the market for occupiers of office premises towards a more flexible environment (which many have been predicting for some time). As office tenants become increasingly conscious of their changing premises needs, we predict what will be the five key hot topics for 2021.

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Affordable housing has been the watchword of 2020 and is likely to be thrust further to the fore in 2021 as institutional investors’ and lenders’ appetite for this increasingly staple asset class continues to grow. You could be forgiven for feeling surprised by this turn of events given, historically, affordable housing has been treated as a disposal asset of little value, typically sold by developers at a very early stage of a development to local authority landlords and to forward fund development of more lucrative open market housing.

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