UK real estate market hopes for growth in 2022

More than half of UK property companies expect their business to grow in 2022. However, alongside a range of other challenges, more than a third expect technology trends to impact their office portfolios alongside other challenges.

As the UK emerges from Covid-19 uncertainty, Crowe has taken stock of the country’s property market to see what lies ahead for the industry. With the UK economy as a whole on the path to recovery, the study finds that long-term optimism is growing within the sector. However, prior to the pandemic, there were so many changing trends still affecting the market that many aspects of real estate portfolios are still being disrupted.

Caroline Fleet, UK National Head of Real Estate at Crowe, said: “It is clear that property companies across all sectors have had to become much more innovative, flexible and adaptable during this time. While Covid-19 may have accelerated these changes or in some cases caused some of the restrictions like the rental moratorium, many of the factors affecting the market existed before the pandemic and will continue to affect the sector post-pandemic.”

Crowe spoke to a total of 99 respondents from all levels and all types of companies associated with the real estate industry. Overall, the real estate market currently looks positive. While a majority of 55% of professionals expected their business to grow, only 5% said they expect it to decline over the coming year.

Against this backdrop, opinions have been more divided on the challenges facing the broader market. As with Crowe’s most recent survey of the UK legal market, firms are more optimistic about their own prospects than about the broader market. For example, although lockdown measures were reversed last year, their impact on consumer behavior will have a lasting impact on real estate.

Calls for more hybrid pre-pandemic work patterns have been accelerated as a result. As Covid-19 expands the ability to work from home for more people even after the pandemic, demand for residential properties near major transport links could ease.

Aside from residential properties, 37% of respondents said they believe offices are the properties most likely to be impacted by technology trends. These, too, have been accelerated by the pandemic as work done in the office has been made possible to work from home. Now that this technology is live, many companies are looking to downsize their office presences to save money. With fewer commuters visiting stores to and from work, retail properties are also likely to be affected by this trend.

This can already be seen to some extent in the property portfolios affected at companies across the UK through 2021. London companies have seen the most impact on their office property portfolios as companies scale back their communal space on the back of the aforementioned trends. Meanwhile, regional businesses saw that retail and residential property portfolios were hit the hardest – thanks in part to changing commuter habits as they headed into London from surrounding towns and cities.

The researchers concluded: “While many companies have weathered the storm of the pandemic and taken advantage of available government support, there is now a steep hill to climb for real estate companies, particularly those in the retail and commercial real estate sectors. There are opportunities for growth, but companies need to adapt quickly to be successful.”