What did our data reveal?

The Covid pandemic when it arrived in the UK in early 2020 posed a systemic risk to large swathes of the property market. Some industry pundits openly talked about “the death of the office” due to the surge in homeworking; there was widespread concern over the future of shops as consumers went online to buy goods. For all forms of property, the inability to view buildings was a major hinderance to dealmaking. This prompted Avison Young to create the UK Cities Recovery Index, utilising high frequency indicators – from traffic levels to retail footfall to restaurant bookings – to judge the strength of the economy and the property market.

The Index has its base of 100 in late February 2020. By late April 2020 it had fallen to 35, indicating that activity across the nations ten largest cities was around 65% lower than when the pandemic first reached the UK. By early June 2022 the index stood at just over 98. This superficially could be taken as a return normal; but in fact, the world is a changed place and property markets have adapted accordingly.

There has not been a “death of the office”, but homeworking is commonplace, and we expect some office space to be repurposed to other uses. We see a future ahead of better-quality offices that facilitate activity-based working.

Throughout the pandemic the retail sector saw winners and losers. Retailers with a strong digital offer, and those deemed ‘essential’ such as grocery stores, as well as e-commerce operators thrived. However, some retailers who were struggling prior to Covid-19 fell into administration, which has resulted in many retail locations across the country experiencing higher vacancy rates than ever before.

As we come out of the pandemic, online shopping levels appear to have peaked and are receding again, but we expect e-commerce to remain a major force, with warehouses more important than ever to retailers. In the future we will see retail locations integrate more leisure, click-and-collect facilities and indeed homes. Industrial is becoming multi-faceted, with growing interest in the last mile and specialist sub-sectors like data centres.

Across the real estate sectors, we expect the new era to be shaped by ESG considerations. High quality assets with strong ESG credentials are in high demand, and we expect that to continue. Poorer quality buildings, which need upgrading to meet the new legal requirements, are likely to be redeveloped; perhaps as mixed-use in recognition that structural change for retail and offices has altered demand levels.

For property, Covid did not create a desert, but it has accelerated trends already underway. This presents opportunities for transformation that could make our cities more vibrant than ever before.