Cushman & Wakefield RETHINKING: The Shape Of Real Estate 2040

(RE)VOLUTION

CHANGE

REAL ESTATE IS IN CONSTANT SLOW EVOLUTION.

We are currently in a period of significant change. The turbulence of the last few years has exceeded that of the past 20, if not 40 or 60. This has been driven primarily through Brexit, the impacts of the pandemic, wars with deep global geopolitical entanglements and a belated global reaction to climate change; in turn impacting supply chains, inflation, monetary policy and new standards and routes towards decarbonisation. Subsequently, these changes and events will drive our places and cities to evolve, firstly through consumer and occupier decisions and then in turn influencing investor and developer activity. Even without ‘once-in-a-lifetime’ events, behaviours change. The most noteworthy impact of behavioural change for real estate in recent years, has been seen in logistics and industrial demand and subsequently supply. The reversal of its trajectory c. 2017/18 was in direct contrast to the demand for retail space, as consumers changed the way they bought goods. Similarly, affordability constraints particularly in London and the South East as a result of a growing population, shrinking household size and low levels of new supply have all underpinned consumer and subsequently investor demand across the residential private rented sector (PRS). Most recently and most pertinently, the pandemic-related impacts of the changes in working behavior have influenced office occupational demand – as a quantum, but also with regards to quality, type and location. As a result, not only has investor appetite for previously desired asset classes diminished (and vice versa), but investor optionality has multiplied. Even in cases whereby that evolution is marginal – as an example, historically life sciences businesses were until relatively recently confined to science parks, and now have a much wider real estate base from which to choose – these decisions are often born out of occupier choice and can have a significant impact, not only for users, but also on our cities, places and of course subsequently investor choices. This is something we analyse in detail, across FUTURE OF CITIES.

Consumer demand for the built environment can change quickly, yet real estate’s ability to react to this change can be slow. As a result, supply and demand are often mismatched. Even so, over time, the make-up of our real estate gradually evolves. Not only in terms of supply and demand, but at the margins, where real estate decisions happen. This impacts scale of development (or demolition); changes of use; occupier and investor demand and of course; the proliferation of new forms of real estate, new operating models, and new investment options.

DARYL PERRY Head of Research & Insight

RETHINKING: THE SHAPE OF REAL ESTATE IN THE UK

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CUSHMAN & WAKEFIELD

UTION

REVOL

REVOL