CULS ARTICLES
Following the Occupier
I
had been considering long and hard how best to address what is a massively challenging topic set by the editor this year. I suspect that if one is looking at trends in real estate in the investment and development sector then the old maxim of following the occupiers is the correct way to proceed.
David Allen Director of Holt Commercial
So, the popular sectors of build-to-rent both multi-family housing and single family housing with purpose-built student accommodation are the obvious occupier sectors whilst data centres, logistics and life sciences are also robust areas to invest in.
Retail has been often discussed as being in decline but I would still consider that retail warehousing has much to offer in terms of its asset management potential, whilst offices in my view, remain challenging across all but the prime market. Here, I will pick out a number of the challenges within the market and look at perhaps just one or two aspects of their impact on specific property sectors. I think we underestimate the demographic impact of an ageing population. It is reported that the replacement rate in terms of children per family should be 2.1 and most mature western economies are below that figure. I can remember writing A-Level essays on this (which is many years ago!) about declining and ageing populations. In economic terms this has many impacts, notably being a smaller tax base and a much higher dependency in some areas. In property terms, perhaps some of the aspects to look at are how do we free up the locked-up wealth in downsizing. My view has always been that high levels of SDLT is an impediment to liquidity and perhaps some direct reliefs on downsizing might help. There are then the challenges of providing residential accommodation for the elderly and there does appear to be somewhat of a bias against this type of housing in planning terms and indeed making it financially viable. At the other end of the scale, there is a bulge in the student age group and a shortage of purpose-built student accommodation. This area of research might well make for a future Land Economy prize. Trying to achieve net zero carbon is a challenge everywhere. The West Midlands has a target of hitting net zero by 2041 but that will involve some very hard decisions as it is not only the new stock that we are discussing but the existing stock. That, combined with no consistency between EPC ratings, Fit Well, Passivhaus Classic, BREEAM, NABERS and Platinum wired scores make it incredibly confusing. The level of upgrade needed for existing buildings is probably only now starting to come into focus. Retrofitting and a recognition of the circular economy, embedded carbon balanced against a building fit-for-purpose will be an ongoing debate. So are tired offices now a value add opportunity enabling tired offices to be repurposed. Generally, on commercial property, a property EPC will have to be an E or better by April 2025 which, in and of itself is not particularly challenging, but making properties C or better by 2027 will be substantially more difficult. Achieving a B by April 2030 is particularly difficult. 78
CAMBRIDGE UNIVERSITY LAND SOCIETY 2023