Our views on the property market now, and post-pandemic
How the property world will be affected by the lockdown depends how long it lasts. A short lockdown’s impact could soon be forgotten and minimal.
However a longer lockdown will mean business closures and a real impact on the market. If restrictions are relaxed even slightly in the next 2/3 weeks we envisage a positive upsurge. Any longer and there will inevitably be some casualties but the government support has be good for many business. We have never been in a situation like this before.
We are positive going forward as always but especially for industrial where demand has been outstripping supply for some time. Even a drop in demand for a while should not has too much of an affect as supply is still low and this will help to hold values. In reality, it is too early to judge and could take up to 12 months to materialise. However supply would have to increase significantly to get to a tipping point where rental growth will slow.
The prudent levels of speculative development should mean that the market is well prepared to weather the storm on the demand side, assuming we head back towards some level of normality in the second half of the year.
An unintended consequence for the logistics market could be the further growth of online grocery shopping which won’t help the high street but as many consumers, who previously didn’t use such services, become more familiar and continue to use it in the future. Should this happen online retailers will have to add capacity at a faster rate than previously anticipated We are hopeful that banks will be encouraged to be supportive business with a good track record despite the recent negative press. This is further supported in talks we are having with developer clients who at the moment are still committed to bringing new schemes forward in due course.
The office work environment may change with firms requiring less space as work from home and technology has proved successful to a degree. There may be more homeworking in the future but we should not forget and emphasise the ‘social’ benefits of office working and networking. However offices may be developed with a different type of accommodation layout in the future to include more meeting areas etc. Social distancing may require larger floorplates which may also be the issue going forward with the leisure sector.
Retail is the main worry for us and will take the longest to recover especially with a new wave of online users. We have seen lease renewals agreed with a one year rent free on a ten year lease which we have not seen since 2008. Break options will become more prevalent with tenants wanting to minimise risk going forward until we get more certainty. The positive news may be for local retailers who in these times have come to the fore and supported local communities with deliveries. Customer loyalty to these operators will hopefully continue and help them to re-open sooner.
We need to stay positive and there are opportunities out there particularly investments where property still provides a good return with the industrial and warehousing sector the most secure.
Landlords will need to be sympathetic and flexible to keep tenants whilst securing continuity of income and this has included rent deferrals and easier more flexible payment terms Here at Trevor Dawson we remain optimistic as the underlying economy was getting stronger and there was the real prospect of new schemes coming forward later this year and into 2021. These schemes will still happen but may just be delayed slightly.