UK commercial property finds itself at perhaps the most significant inflection point of the post-war era, as Covid-19 turbocharges our changing retail habits and fundamentally alters office life. There are clear winners, demonstrated by logistics properties changing hands at yields of 2.5% and a boom in grocery estates. But for substantial swathes of the UK’s high streets and shopping centres, managed obsolescence appears to be the immediate reality. Even with the breathing space of the government’s eviction ban, retail insolvencies and store closures have climbed from already-elevated levels to hit a high equivalent to the great recession. Overseas investment into prime London office space has recently climbed to close to its five-year average, but there are clear signs of a developing two-speed market. The volume of leasehold space vacated by former tenants and now sitting empty has reached a 2004 high, with tenants downgrading requirements. Surveys conducted by major property agents indicate that many of the habits picked up by service-sector employees over the past 18 months may become permanent features of their working lives. And at the other end of the equation, regulation appears to have finally caught up with the open-ended property funds sector, following its third gating since 2007. Assets held by the unlisted members of the Association of Real Estate funds are already down almost 10% from a recent high.
(for more on the Morrisons sale, see our feature on p10)
