Spring is in the air and the vaccine roll out is almost hitting one third of the population. Positivity is returning to the country for the first time in 12 months. Here we examine the factors effecting the property market and predictions of how different sectors will react:
Industrial
This has been the best performing sector for the last 12 months. Fuelled by a high demand for storage, manufacturing of PPE and the move of many retailers on line, there is an acute shortage of accommodation in the market place. This in turn has kept rents high and capital values have risen sharply, due to the extreme shortage and low interest rates.
Once the block on forfeiture ends, it will lead to new stock coming back to the market, but demand is so high, it is believed it will have little impact on rental and capital values. It will just satisfy the build up in the demand in the market place. The way forward for industrial looks good, with continued demand for trade counter units and smaller e-commerce warehousing.
Offices
The office market has been greatly effected due to the “ work from home” policy during the lockdowns. Many tenants have seen the opportunity to re-look at the way they work and taken the opportunity to release themselves from their portfolios. It is true to say, the 21st century office set up was a recipe for pandemic causes. Hot desking, squeezing in as many staff as you could in one small floor area. Too many sharing of common facilities.
So will the office market recover? We believe that companies will return to their offices, but possibly in a different, more occupier friendly way. Not everyone can work from home. We see a more flexible work environment where employees have the ability to work a mix office / home base. Office premise will potential have lower desk space, but higher meeting rooms / conference training areas for the workforce to meet. Will we see the return of cellular office space. Certainly greater distance between workstations.
Retail
The retail market has been greatly effected over the last 12 months. High Street destinations have suffered the most, with as much as 50% of the High Street locations becoming void. Is this all a cause of COVID? One well know successful retailer commented, that due to online shopping, this was always going to happen. COVID simply brought it forward 3 years.
Drastic action is needed to save the High Street. Many forward thinking landlords / developers and looking at these properties and seeing opportunities to redevelop including residential development. Carmarthenshire Council have a programme in Llanelli, where they are reducing the ground floor floor plate of the retail element and letting smaller spaces to retails below the rates levels. The remaining retail accommodation is converted to residential. So you have competitively priced retail units, with a local residential neighbourhood, back in the town centres.
Retail warehouses will recover quicker. Still effected by the charge online, there are still some goods that cannot be purchased online.
Investment
Investment in the industrial market has remained strong through the pandemic. With interest rates at an all time low, where else do you invest your money. Well let multi estates or long term lettings are widely sort after. Investors are also starting to return to the office market. Very competitive opportunities exist in the smaller end of the market and developers / investors are eyeing up small suite refurbishment opportunities.
The growth for redundant 3rd generation office buildings in the city centre still continues. With student development reaching saturation point, main stream residential lettings is always an opportunity to create a quality investment.