Editor’s comment: look to the long term

UK property needs to adjust quickly to a climate of lower returns and worry about what really matters: preparing for a future which will be heavily influenced by decisions taken in the year ahead. The annual Emerging Trends in Real Estate report from PwC and the Urban Land Institute is perhaps the most closely read of the many future-gazing reports that appear around this time of year. Forecasts from a record number of senior industry figures are included and there is a near uniform view of the year ahead (p31). The squeamish may want to look away; the confident should read on. After all, preparing for 2030 matters at least as much as dealing with 2017. “There is a general post-Brexit slump in sentiment towards the UK,” says the report. Around 90% of the 800 or so respondents believe the decision to quit the EU will hit values in 2017. “UK property will switch from being an outperformer to an underperformer,” say the authors. So the UK’s highest ranking city last year, Birmingham, slips from the top 10 to 22nd. Manchester and Edinburgh sit below it in a table whose upper echelons are dominated by German cities and led by Berlin. (None fare well in EGi data either, p27). And London? It now languishes fourth from bottom at number 27, just ahead of Istanbul, Athens and Moscow. Ouch. In truth, the rankings, superficially depressing though they are, merely quantify what many of us already suspected. More interesting – and more important– is what respondents had to say about the decade ahead. Despite short-term political uncertainty weighing heavily on respondents’ minds – amplified as the clock ticks down to a pivotal US presidential election result – “long-term” disruptions are a genuine business concern. It is a refreshingly rounded view taken by an industry that has always been more orientated towards thinking about short-term opportunity than structural change. For some, it is changes in energy, science and food that will have the biggest macro impact. For most, it’s technology and social change. And for the smartest, it’s the interaction of the two. A separate PwC report for the European Commission last year put the potential value of the sharing economy – a sector where there is no shortage of businesses looking to emulate the success of Uber and Airbnb – at €500bn within a decade. Many have clearly woken up to its potential: 77% say they are tailoring their real estate strategy in response to demographic changes. And for most it is forcing a rethink in the nature of space. Some 91% say tech is changing the way we use buildings; 55% say how a building is used is now more important than the asset itself. This societal shift underpins the growth of the private rented sector. It is driving the switch in thinking from sustainability to wellness. The advent of driverless cars, the growing importance of leisure and the spread of 3D printing are changing thinking in the industrial and retail sectors. “Offices,” say the report authors, “will be ruthlessly judged on their technological capabilities and how they boost collaboration and human interaction. The quality of the workplace and how it aligns with all the other places we spend our increasingly integrated lifestyles will become a key tool in the war for talent.” The report paints a compelling picture of an industry that “has a high level of awareness of the challenges it faces and a need for innovation, but a lack of confidence in what changes are needed and when”. In short: some in property get it and some don’t. In 2017 you had better decide which camp you are in. • To send feedback, e-mail damian.wild@estatesgazette.com or tweet @DamianWild or @estatesgazette