CBRE: UK real estate to see marked recovery in 2022
A growing economy and a strengthening of the labour market will provide a positive backdrop for real estate in 2022, with total returns for all UK property forecast at just over 6%. This is according to the UK Real Estate Outlook, published by real estate advisor CBRE.
According to the company, in the near term, rising Covid-19 cases, including the new Omicron variant alongside supply bottlenecks and rising energy prices are the main risks to the pace of recovery and the inflation outlook.
ESG Impacts
The ESG agenda will continue to be a priority for the property industry with the tightening of regulation across all parts of the UK set to continue, as governments aim to make progress towards ‘net zero’ emissions targets. The new Heat & Buildings Strategy, UK Green Taxonomy and Sustainability Disclosure Requirements will be the main strategic drivers of change.
Jen Siebrits, Head of UK research, CBRE said:
“Alongside a real estate recovery, we can be certain that sustainability will take centre stage this year. Occupiers across all real estate sectors are focussing on green buildings and it is evident that sustainability is also playing an increasing role in investor strategy.”
Office Outlook
In the office market, take-up will return to historical levels in 2022 driven by healthy levels of job growth and the release of pent-up demand. More flexible working patterns and the drive to attract employees back to the office will mean that occupiers place a greater emphasis on curating great ‘work experiences’ through integrated space, technology and service.
Logistics Outlook
CBRE anticipates that the UK logistics market will remain strong with rental growth likely to continue throughout 2022 in all UK regions, due to a significant demand and supply imbalance that will not be addressed in the short term. However, the market does have its challenges, including planning, labour availability, rising construction costs, as well as pressure to address sustainability and carbon reduction issues, as part of developer’s specification proposals.
Retail Outlook
For the retail sector, recovery is already underway and CBRE expects this to continue, strongly boosted by the highest levels of savings on record built up during the pandemic. Improving footfall, retail and leisure spend in 2022 will strengthen the occupier market. Whilst the market continues to recover, downside risks still remain in the form of future COVID-19 outbreaks, global supply chain disruptions and consumer price inflation.
Hospitality Outlook
CBRE anticipates record M&A activity across Operational real estate sectors, particularly across leisure and pubs as most sectors have positively emerged from the pandemic. Additionally, there has been an increase in investors with strong capital reserves seeking to take direct operational risk within the leisure market.
