With the new year now upon us, the predictions for what 2022 could bring from a property investment perspective continue to roll in. Here, Robert Crawley, director at Lateral Investment Management, and James Gray, managing partner at Cluttons, outline what they expect to happen in the year ahead.
"We believe that investment transaction volumes and the development of life sciences real estate will continue to rise even rivalling industrials which, despite many calling the market on several times over the last year, are still going strong. We believe there will be many new entrants to the life sciences sector both from the UK and overseas as funds look to divest retail assets in favour of a more balanced weighting," Crawley said.
"On the construction and design side, we think that there will be a more conscious shift in how we measure embodied carbon and a crackdown on waste of materials. Despite the groundswell in favour of combatting climate change, 17% of construction materials were still going straight to landfill just 18 months ago. We also believe that 2022 will finally bring a real value associated with sustainability as investors shun properties without the right green credentials and legislation-linked buy and sell choices are made - for example, no core fund will buy a property that has an EPC of E as it cannot be rented, sold or otherwise in five years' time without serious investment in between."
He added: "We will still see a raft of retrofitting across the UK as people turn against demolition of existing buildings, but still need to make properties more energy efficient. Those who can do this cost-effectively will go far. Those who can do it for heritage buildings will go even further. We just hope those who can, share best practice with the wider industry so that widespread improvements can be made."
Crawley went on: "Hopefully as occupiers begin to place greater emphasis and value on green workplaces, we will also see investors and landlords of all sizes investing more upfront in sustainability features which may allow occupiers of all sizes to have access to sustainability features that they have previously been priced out of."
"On the tech side, we believe that there will be a return to 'getting the basics right'. There are many companies that have invested thousands in complicated systems and apps that may help let buildings because they look good on the marketing particulars but whose employees don't know how to or want to use them. Contrast this with being able to do their jobs effectively due to having the right level of connectivity whether in the office or at home and the choice is simple."
He concluded: "And finally, the design of any property - retail, resi, industrial, office and so on, will place even more importance on how the people will actually interact with the building. In many cases, we may not know the exact answer yet as we watch and assess how behaviours are changing. Either way, post-pandemic it will never be more crucial to think about this and build this insight, plus a wedge of flexibility, into any scheme."
Meanwhile, James Gray said: “2022 will be the year of ESG, connectivity and collaboration. On the ESG front, businesses will start placing real values against sustainable property. They have to – impending legislation targets such as EPCs demand it. But moreover, they should because talent, tenants and consumers are driving the climate change agenda more than ever."
He added: "Our ESG experts Raoul Veevers, John Gravett, Rob Burke and Ian Paton tell me that 2022 should be the year that future-proofing and proactive investment in sustainable measures will finally become widespread across all stakeholders as the drive towards net zero gathers momentum."
"We will see a significant rise in landlords and new housebuilders installing EV chargers and we should also see the emergence of local authorities putting in place EV charging strategies, with the help of reputable infrastructure surveyors, across their constituencies."
He continued: "On the retrofitting side, we will see a bigger focus on both homeowners and commercial landlords on how to improve their properties’ EPC ratings. We may see increased take-up from the government’s subsidisation of some 90,000 ground source heat pumps but this is not likely to be widespread amongst those on smaller incomes and much more likely to benefit the middle class who can already afford new boilers. On EPCs, our valuation heads, Jonathan Rhodes and Einar Roberts, believe that lenders will prove to be the key in meeting the increased EPC targets as they can demand improvements by adapting their lending policies to both homeowners and landlords alike."
He added: "On connectivity, we will hopefully see the government’s revisions to the Electronic Communications Code become policy in early 2022, speeding up the ability to lay down much-needed fibre infrastructure to support the UK’s gigabit roll out. This is something that our expert Darren Zitren is in constant dialogue about with network providers and operators. We also think that due to more private and public sector collaboration, we will see more practical targets put in place by the government together with a realistic roll-out strategy that will see the UK jump from 4th in the G7 to leading the way. Similarly, we expect that more businesses will offer connectivity packages to employees working from home – perhaps as part of an enhanced benefits package."
Gray continued: "On the residential side of the market, Steve Cooper and our resi consultancy experts think that 2022 will see a ‘fast-track to beauty’ for all development as local authorities prepare design codes for high-quality places which include appearance as well as healthy, green sustainable and distinctive places related to both the NPPF design requirement and the government’s net-zero targets."
"We hope, moreover we’d like, to see local authorities and planning committees becoming more flexible, commercial and innovative, particularly when it comes to the provision of affordable housing. Smaller developers who own sites cannot always meet the 35% ratio for AH which can lead to sites being locked in planning negotiations for years. All parties, driven by the institutions, should work together with local authorities and planning advisors to drive more innovative ways to deliver much-needed housing and to unlock those sites that have strategic value to their communities.”