Real estate sector continues to grapple with the COVID-19 pandemic, and some ongoing uncertainty around Brexit, the EU deal and the vaccine rollout give the industry cause for optimism. UK economy could see the first signs of recovery from mid-2021 with record GDP growth expected in 2022. Once lockdown measures are eased, cities will bounce back as offices, shops and food and beverage outlets benefit from a surge in suppressed activity. All property types will need to adapt with the end-user in mind, to deliver an experience rather than simply a functional space. In retail, physical stores will still have a place but it will be a year of reinvention, whether rethinking the customer experience or a change of use. In the housing sector, the desire for more space will lead to more families and older people moving from cities to suburbs. City centers will therefore need to work harder to keep people coming back through a varied range of high-quality leisure attractions and workspaces that justify the commute. Strong investor demand and solid returns in the industrial and logistics sector look set to continue in 2021, with £50-£55 billion of property expected to change hands. The alternatives sector will continue to take off as investors hunt product and yield, with build-to-rent, senior living, data centers and life sciences remaining buoyant. Investment volumes will also rely on uplift in corporate and debt deals, more joint ventures and more public-private partnerships. Investors will move away from single sector strategies towards mixed-use assets and they will work closely with occupiers to create more flexible and sustainable real estate.
The retail sector is arguably the biggest property casualty of the pandemic, yet the retail investment market will offer some of the most interesting opportunities in 2021. The repurposing of empty stores on high streets and retail parks into homes and city logistics hubs is at the top of the agenda with 40,000 vacant retail units across the UK, a number expected to double by 2026. As employees return to the office for at least part of the working week, hygiene and safety will remain top of mind. Workplace design needs to focus on amenities and workspaces that genuinely add value, enable collaboration and build communities. The government has made it clear that sustainability is a domestic priority in the UK and with COP26 taking place in Glasgow later this year, the focus will only increase. Increased analysis of climate change risks and a growing understanding of the investment required to get buildings to net zero carbon are likely to result in some stranded assets.
Buildings with high sustainability credentials can attain a 6-11 percent rental premium over comparable buildings.