Cushman & Wakefield RETHINKING: The Shape Of Real Estate 2040

THE RECENT PAST

TO 2040

10 FASTEST GROWING SECTORS

Between 2005 and 2023, the quantum of real estate across England and Wales increased by 12% against a backdrop of numerous property cycles, alongside population and economic growth of 13% and 24% respectively. This time period was also punctuated by a series of negative shocks - the Global Financial Crisis (GFC), Brexit, COVID-19, which impacted the demand and supply of real estate. Offices and retail were the primary growth sectors, at the start of this period, both increasing by 6% from 2005 to 2015. However, since then, behavioural changes in the way we shop has spurred a growth in logistics and industrial stock amounting to 4% from 2015 to 2023, despite having previously seen floorspace (particularly in urban areas) eroded. The expansion in the housing market, while not matching demand, has been significantly stronger and more persistent, amounting to 15% growth from 2005 to 2023.

Going forward, despite projections of a more subdued rate of economic and population growth, the requirements for real estate continue to be significant. This will be fundamentally driven by behavioural and demographic change as a result of technological advancement, demographic shifts and an evolution of the standards and requirements of our real estate. Based on our analysis of demand-side drivers, by 2040, we expect to see a requirement for additional real estate across our commercial and residential stock to the tune of 11% by 2040. However, where those requirements lay will be determined by sectoral differences as covered below and in detail later in our report. Our projections find that annual increases in the requirements for life sciences, hotels and logistics and industrial sectors range between 2.6% and 0.9%; while the largest requirements for additional stock as a proportion of existing stock are likely to be in those focused towards housing an ageing population. Our projections for care homes are for annual growth of 2.2%, while one scenario for seniors housing could be as high as 6.0% - although we note the ambitious nature in the seniors housing section and separately in Housing an Ageing Population , written in conjunction with the BPF.

SENIORS HOUSING

DATA CENTRES

LIFE SCIENCES

CARE HOMES

PRS

SELF STORAGE

HOTELS

LOGISTICS & INDUSTRIAL

RETAIL WAREHOUSING

2005-23

2023-40

PBSA

-30% -10% 10% 30% 50%

70% 90% 110% 130% 150% 170% 190% 210% 230% 250%

PERIODIC GROWTH RATE

RETHINKING: THE SHAPE OF REAL ESTATE IN THE UK

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CUSHMAN & WAKEFIELD