Avison Young recently released a 2020 Forecast report, listing what it considers to be the 10 most important trends taking place within commercial property this year. Before we take a look at the most important changes occurring within retail, offices and logistics, below is a summary of some general trends that Avison Young expects to see more of in the 2020s.
Continuing to live with low interest rates - With inflation seemingly nailed to the floor across most of the western world, there are few signs that interest rates are set to rise any time soon. Lower for (even) longer remains the mantra for investors and capital continues to flow into real estate as they search for income return and capital preservation. However, central banks currently have little ability to raise interest rates, robbing them of room to manoeuvre if – or more likely when – a slowdown turns into a recession. With governments seemingly devoid of effective policy initiatives, the impact on rental income in the event of a protracted recession could be significant and prolonged.
Populism is changing the world - Landlords, developers and occupiers need to pay increasing attention to local political activism, as today’s street protests increasingly signal tomorrow’s policy initiatives.
De-globalisation - Cross border flows of capital into investment markets around the world are set to accelerate over the coming years as rising wealth in Asia targets real estate in the west. However, nearshoring has become a commercial imperative; it enables shorter delivery times and greater localisation of products, allowing companies to meet consumer demands and react to trends more quickly. Manufacturing facilities will see renewed demand and logistics networks will focus more on integrating local and regional hubs. Shopping centres offering a wider range of locally sourced foods, products and services will be differentiated from their competitors, which could breathe new life into the struggling retail sector.
City responses to climate change - Cities around the globe are recognising their responsibility to mitigate the impacts of extreme weather events on local people, property and infrastructure. By 2030, according to the UN, unless there is significant investment to make cities more resilient, natural disasters may cost cities worldwide $314bn annually and climate change could push up to 77m more city residents into poverty.
In 2019, the UK became the first major economy in the world to pass laws mandating net zero greenhouse gas (GHG) emissions by 2050 and cities such as Nottingham, Bristol, Oxford, Cambridge and Manchester all have ambitions to reach net zero GHG emissions through more localised initiatives. Globally, the opportunities are endless when you consider that 70% of the world’s population will live in cities by 2050, but 60% of the real estate that will be needed to house, educate, entertain and provide a workplace for them, has still not been built.