Low interest rates, socially responsible investing, and climate impacts among global trends identified in Avison Young’s 2020 Forecast, and resilience is key trend in the UK.
Avison Young today released its Global 2020 Forecast, including ten trends to know for 2020, and national and local property market outlooks for the UK. The annual report series provides perspective on how global events, trends and indicators impact commercial real estate in a variety of sectors, including capital markets, office, retail, build to rent, industrial and hospitality.
Dr Nick Axford, Global Head of Research for Avison Young said:
“Following a period of sustained political turmoil, 2020 marks a new era for the UK. Whilst our commercial real estate sector will feel the impact of global trends including low interest rates and climate change, the next 12 months present some valuable areas of growth that investors and developers in the sector should look to harness.”
Among the trends impacting real estate strategies and business identified by Avison Young:
• Lower for longer: How investors are dealing with a low inflation, low interest rate world.
• Building resilience: Cities across the world are leading the charge in responding to climate change, to ensure economic, social and environmental sustainability.
• Let’s talk about flex: The future of flexible office spaces.
• Rebirth of retail: The re-invention of the retail sector into a technology-driven experiential offering.
• Future growth: The opportunities and challenges of recreational and medical cannabis legalisation.
• (Place)making an impact: Placemaking is becoming the focus of socially responsible investors looking for impact investment opportunities.
Stephen Cowperthwaite, principal and managing director at Avison Young’s Liverpool office, said:
“Our city has seen extensive change in the past decade, more so than at any other time in recent history. Liverpool’s industries and infrastructure have changed dramatically, capitalising on its niche sector specialisms and its waterfront. As we look ahead, there are a series of large-scale mixed-use projects on the horizon, all of which are set to contribute to the current sense of opportunity and growth that the city region has to offer.
“Paddington Village and the wider Knowledge Quarter represent the heart of Liverpool’s world-leading life sciences, health and digital industries. In 2020, we expect the Knowledge Quarter will continue to generate considerable investment for development projects in collaboration with the universities and Liverpool Council. Most notable of these is The Spine, a 160,000 sq ft development in the centre of Paddington Village, focusing on biotech innovation and due for completion in 2020. This scheme alone has already acted as a catalyst for development in this part of the city and it is set to continue.
“Liverpool’s office market is constrained by supply, particularly the shortage of Grade A space. Declining availability has contributed to take-up for 2019 to be below the city’s five-year average. Following the recent 65,000 sq ft letting to Sony at Echo Place and BT reportedly seeking 100,000 sq ft of prime office space, it indicates that demand for medium to large spaces continues. The next large-scale projects expected to provide new office accommodation include Pall Mall and Liverpool Waters, but as they are not due to come on to the market within the next year, we will continue to face a lack of supply.
“The industrial sector in Liverpool is growing, albeit at a slower pace than much of the rest of the UK. Rental growth achieved 2.5% over the course of 2019 and capital value increased by 1.7%. This modest growth is due to the size of Liverpool’s industrial market, with Liverpool being the closest multimodal port to 50% of the UK’s manufacturing sector. Its state-of-the-art technology and good connectivity have enabled it to become one of the UK’s key ports, significantly contributing to Liverpool’s industrial economy.
“As with many UK towns and cities, 2019 was a tricky year for Liverpool’s retail sector, with a number of household names leaving the high street. However, prime spaces in the city’s retail core remain resilient and are still able to attract quality tenants, while secondary markets are experiencing rapid decline. This is forecast to continue as high streets and town centres are reconfigured to new consumer and community needs.
“Local authorities are taking a greater responsibility for these declining areas, exploring plans to reconfigure high streets and town centres to serve more community-focused functions. Although moving away from the traditional retail model may not generate the same level of income, by bringing in alternative uses to vacant retail space, there is a value generated in terms of social, community and health and well-being that is not necessarily captured in monetary terms. Will 2020 be the year the retail-centred high street as we know it changes for good? Watch this space.
“Over recent years, there has been a growing feeling that Liverpool has upped its game and is beginning to capitalise on what many of us have believed to be true for a long time – this city is special. The recent political uncertainty in the UK resulted in an air of caution across the UK property market, but as one of the country’s fastest growing cities, now is not the time to be resting on our laurels. Throughout 2020, we expect to see more public and private partnerships formed to help create new opportunities for Liverpool and promote it as the world class city it is.”