The UK real estate market is anticipating a fundamental shift in revenue generation
The firm asked more than 500 of its real estate, construction and planning sector clients for their views on the state of the property market at the start of 2021 – after the UK had signed its Trade and Cooperation Agreement with the EU but before the government announced its 'road map' for the easing of Covid-19 restrictions.
While the impact of Covid-19 has clearly affected the market's confidence, by far the most pressing concern for respondents was the strength of the UK economy.
A number of respondents cited the stage of the economic cycle the UK was at pre-pandemic, suggesting that activity in the UK property market – commercial and residential – could decline over the next year.
Headline findings include:
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43% of survey respondents said they expected the UK real estate market would undergo a U-shaped recovery (as opposed to 17% who thought the recovery would be V-shaped, while 35% thought the recovery would be a bumpier W-shape).
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An overwhelming 78% of respondents said they expected demand for office leasing to be less than it was before the Covid-19 pandemic, while 65% said they expected to see increased demand for serviced and/or flexible workspace.
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48% of survey respondents did not believe that monthly rent payments are here to stay, however 39% of respondents thought the shift to periodic payments would last.
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Despite general uncertainty about the future of traditional UK offices, office space remained the most popular asset class among Fieldfisher's survey respondents, with 43% saying this was one of the areas they were most interested in.
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43% of survey respondents expected to find it more difficult to raise acquisition finance in the next 12 months than during the previous year (while almost the same number, 39%, expected no change); similarly, 52% of respondents said they thought it would be harder to raise development finance over the same period (22% predicted no change).
Had this survey been conducted following the announcement of the government's post-Covid 'road map', the responses might have been different.
However, many of the underlying trends that appear to have informed the responses pre-date the pandemic and represent long-term structural issues in the real estate industry.
Commenting on the findings, Cecily Davis, construction and projects partner at Fieldfisher said:
"It is clear from the responses we received that the UK real estate sector is preparing for new ways of generating, collecting and deploying income.
"While there appear to be mixed feelings about shifting to more flexible leasing and rent payment arrangements, there is tentative enthusiasm for delivering new kinds of work and living space.
"Positivity around residential and office accommodation is moderated by a less hopeful outlook for leisure and retail premises, while the biggest concerns among market participants are the strength of the UK economy and the fall-out from Brexit.
"Change can often be daunting, however the pandemic emphasised the necessity of adapting to new ways of working and 2021 promises to be a very interesting year for the real estate and construction industries."
For full analysis of Fieldfisher's findings, download a copy of the survey.
About Fieldfisher
Fieldfisher is a European law firm with market leading practices in many of the world's most dynamic sectors.
Our network has more than 1,700 people working across 25 offices providing highly commercial advice based on an in-depth understanding of our clients' needs.
Fieldfisher's Europe-wide Real Estate specialists advise developers, financiers pension funds, private equity funds and REITS through to corporate occupiers, retailers, borrowers and lenders.
As well as working with companies domiciled in Europe, we are experts at assisting with international investment in European markets and general cross-border, work focusing on everything from luxury hotels to major infrastructure projects.
Our Construction and Projects team helps clients deliver construction, engineering and infrastructure projects on time and within budget.
The team acts for developers, asset managers, funders, contractors, sub-contractors and public authorities, advising across a variety of sectors including building, energy, infrastructure, marine engineering and shipbuilding, mining, hospitality and leisure, healthcare, PRS and transport.