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Resilient property sector at the heart of the UK economy

30/11/2020
Lodders Property Seminar 2020 - speakers

Lodders Property Seminar 2020 Report: The UK’s property industry is proving itself to be resilient and adaptable and right at the heart of the UK’s economy.

This message was loud and clear from the speakers at this year’s Property Seminar, that for the first time went virtual and online, but as in pre-COVID years, attracted well over 120 delegates from across the UK’s real estate, commercial and residential property sectors.

The event was chaired by head of Lodders’ Real Estate practice, Mark Miller, who said in his welcome: “The country’s property sector is resilient and adaptable, and the pandemic won’t hold us back. Our industry remains at the heart of the UK’s economy.”

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Recovery will be strong

Savills’ Simon Preece, a specialist in market dynamics for the national office market, shared some of the findings of the firm’s 2020 market dynamics research, and explained: “The UK’s property development sector, spanning office space, logistics, retail and residential, will have a weaker 2020 than some countries, but recovery in 2021 will be strong.”

He said that Savill’s research shows that the country’s logistics market has in fact had a record-breaking year:

“Take-up of commercial space in the sector in 2020 is the highest ever recorded. This has been driven by Amazon’s expansion and the growth in online sales for retailers that has accounted for 35% of take-up this year, in stark contrast to numbers for 2019. This is having a huge impact on the demand for large distribution centres,” he said.

“COVID-19 has perhaps accelerated some challenges that were facing the retail sector, but it’s not changed the direction,” he said, citing the growth in ecommerce, uncertainty over Brexit and its impact, shifting consumer shopping habits, and disruptors such as Primark.

“The investment volume story has been typical of a recession,” he said. “Between January and October 2020, this was 40% down on the five-year average at £32bn. Compare this to 2008 which was 51% down on the preceding five-year average, the end of 2020 is already on course to surpass this thanks to a strong first quarter for the sector.

“But a bounce back will be limited because of Brexit and COVID-19,” he warned.

Opportunity knocks for biodiversity

Jon Dearsley leads Savills food and farming team and is the firm’s UK lead on natural capital, focusing on net environment gain.

In his presentation he shared his thoughts on how biodiversity net gain can be extended beyond farmland, and the implications and opportunities for developers.

“Biodiversity net gain works by developers using Defra’s biodiversity metric that is based on a habitat survey of the proposed planning site, to calculate the pre-development biodiversity units and a projected post-development value, allowing the difference in biodiversity to be measured,” he explained.

“It is focussed on supporting and encouraging development that leaves biodiversity in a better state than before, and an approach whereby developers work with stakeholders to support their priorities for nature conservation.”

Simon believes that collaboration across building, planning and development is key to achieving this: “Parties have to weigh-up the pros and cons and collaborate. They must look at all the opportunities from social prescribing, peatland restoration and woodland carbon, to nitrate offsetting, ELMS, and catchment management agreements.”

He added; “Keep a close eye on the tax implications of land use change away from agricultural uses to environment purposes.”

Keynote

Stoford is a privately owned company established in 1996 to specialise in occupier-led property solutions for business.

One of the UK’s leading property developers, and headquartered in Birmingham, Stoford is a specialist in occupier-led pre-let, property and land solutions for business. To date, it has completed commercial developments totaling over 54 million sq ft of commercial developments across a diverse range of sectors throughout the UK, with a portfolio that includes industrial and distribution warehousing sites, production plants, business parks, offices, retail schemes and hotels.

Stoford’s Director Tony Nash has been with the business since it began and leads the development team. In his keynote speech, he explained Stoford’s business model is built on an ‘open book partnership’ between occupiers and landowners:

“This means both parties share in the success of a scheme, and takes the ‘development risk’ away, with development capital provided for planning, procurement, construction and infrastructure.

“Stoford procures the most competitive prices in the market by driving efficient design with in-house project managers,” he said.

COVID impact: perfect storm

As the pandemic hit in March, Tony said the logistics and industrial property sector went into ‘initial panic’. “There was widespread perceived economic and construction slowdown, and disruption to the supply chain,” he explained.

In fact, positives for the sector were quick to emerge: “Online retail demand saw an increase, alongside onshoring of the supply chain, particularly around manufacturing PPE and increased warehouse, with an increase in take-up of rental industrial property,” said Tony.

“However, while we’ve seen an increase in tenant demand for warehousing, there’s been growing demand for a drop in retail rents at shopping centres and offices, and a worsening in the general economic climate around Logistics Defensive Investment.

“There’s been ten-years’ worth of change in just six months. The increase in online demand has led to a rise in demand for B8 property, onshoring in manufacturing and the supply chain has increased B2 and B8 demand, whilst investment demand has triggered an increase in values.

“All in all, this represents a perfect storm for increasing values for warehousing.”

Lodders legal and planning updates

In a whistle-stop legal update round-up, Lodders’ real estate and construction specialists Alastair Frew and Heidi Brennan, both partners in the Real Estate team, and planning specialist and partner Victoria Longmore, reminded delegates of the new Class E Commercial Class, that will mean planning permission won’t be required, as well as changes to F1 and F2.

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