JLL predicts investment volumes in UK property to total £55bn in 2021
Living, logistics and life sciences to lead growth
JLL has predicted that investment volumes for UK real estate in 2021 will total between £50bn and £55bn. This is up around 50% from the £35bn of transactions expected for 2020, driven by strong activity in the living, life sciences and logistics sectors
Jon Neale, head of UK research, JLL, said: “Despite concerns around impact of the pandemic and subsequent economic fallout, returns from high-quality UK commercial real estate have never looked more attractive compared to other assets. Demand from global investors, which driven by a wider range of structural factors, will remain strong over the coming year – as is already evident in the investment market. Confidence will rise and new opportunities emerge as the economy recovers and restructures over 2021”
In its 2021 Property Predictions, JLL also cites the real estate industry’s ever-increasing focus on sustainability and wider social impacts. Last year saw further commitments made across the industry towards the goal of ‘net zero carbon’, particularly by investors and developers. It is expected that 2021 will be a milestone year for climate action with the UK hosting COP26 in November, bringing an increased expectation on UK businesses and government to showcase leadership.
JLL highlights urban logistics as a sector that will continue to see strong performance, driven by the continued growth of e-commerce and the need for efficient supply chains, which has been accelerated by the COVID-19 pandemic. The challenge of getting goods to consumers, particularly in major cities, becomes ever more complex and real estate solutions are central to this challenge. There will also be a spotlight on offices and how they are adapted, with JLL confident that they will remain a central part of many people’s working lives., while flexible office solutions are expected to evolve to meet changing demands of new hybrid working environment. Life Science occupiers will support growth in the office sector, with rapidly increasing demand for suitable space in many locations, both in city centres and best-in-class business parks.
Neale added: “Urbanisation has been one of the megatrends shaping economic development over the last half-century, but the pandemic has brought a brief retrenchment as we have been temporarily forced away from our city centres and office buildings. Although companies and employees will adopt a more flexible approach to work after the pandemic, cities will remain the engine of growth, with companies even more keen to locate within the largest possible commuter catchments. Although older commuters may choose to locate further from city centres, urban living will remain popular, particularly amongst the younger population. This suggests that over the coming cycle city centres could actually strengthen over the cycle, with real estate at the centre of this. There will of course be winners and losers, and what will differentiate the most successful places are progressive and flexible urban planning policies, public-private partnerships, and a genuine mix of uses in key locations.
“While we expect city centres to remain vitally important, people now have alternatives in the form of home working and an expanded online retail and entertainment offer, and the quality of our buildings must improve to drive continued engagement. There will be real demand for smart, sustainable and healthy buildings, and those that do not offer these attributes will fall behind and risk obsolescence. It will be interesting to see how developers and investors respond to this demand.”
JLL also points to the 40,000 vacant retail units, a number it expects to double by 2026. The repurposing and repositioning of this stock to be among the headline stories of 2021 and beyond, with a with a heavy focus on collaboration – between the public and private sectors to unlock land, between international equity and local expertise, and between developers and occupiers to ensure space is suited to the end-user.
Finally, JLL predicted that the living sectors will continue to grow over the course of 2021, with multi-family residential, student housing and later living all expected to attract further strong investment. The impacts of the pandemic, as well as ongoing demographic changes, ensure that these sectors will remain central to many investors’ strategies over the coming years.
Chris Ireland, JLL UK CEO, concluded: “The UK real estate market is likely to continue its recovery in the first half of 2021, following a tumultuous 2020 which gave us the dual challenges of COVID-19 and Brexit. We expect investor confidence to build as the year progresses, and as the vaccine rollout starts to take effect. However, caution will remain across the market as we reassess the ways in which we live and work.
“Businesses will become increasingly focused on the climate emergency, and with COP 26 being hosted in the UK in November 2021, this will further elevate sustainability from a trend to a fully embedded way of thinking across the built environment.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of over 92,000 as of September 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.