There can be little doubt that COVID-19 has had a significant impact on UK real estate. Construction projects came to a standstill, and demand for commercial spaces has fallen. But the residential sector, particularly Build to Rent (BTR) tells a different story.
Led by Stephanie McMahon, head of research at BNP Paribas Real Estate, this ULI UK webinar brought together a number of industry experts to look at the housing sector’s response to COVID-19, and consider what new trends might emerge in the future.
Stephanie McMahon Head of Research
BNP Paribas Real Estate
The impact of COVID-19 on the UK housing market has been less severe than anticipated. According to Q2 2020 reports, mainstream residential sales were down, but prices continued to increase. Recent changes to Stamp Duty Land Tax (SDLT) and potential changes to Capital Gains Tax could see more movement in the market.
For the panellists, the COVID-19 pandemic presented an opportunity to push forward ideas that they had previously been working on.
Russell Pedley, director at Assael Architecture, believes that mixed-use and co-location of residential with different assets will form the basis of this change, creating more resilient assets. Beyond the obvious mixing of retail assets with BTR, he sees hospitality, transport and light industrial space playing their part within this model.
Ashley Perry, director of BTR consultancy at LIV Consult, and Anette Simpson, director of developments and partnerships at Legal & General (L&G) Affordable Homes, both agreed that BTR is showing the most resilience.
Where this is likely to garner more interest, noted Pedley and Simpson, will be in suburban options for the sector.
But for the housing market, particularly within affordable housing, employment figures will be the crucial variable to regaining customer interest. However, the fundamentals of the market are still there, driving revenue and consumer interest.
There was a mixture of views among the panellists over the viability of mixed-use assets. For Pedley, co-location with a range of assets is the future for residential development. However, Simpson believed that while mixed-tenure models hold some appeal for investors, mixed-use developments could be problematic when it comes to issues of ownership.
Pedley agreed that there are challenges to the mixed-use model. The surprising recent change in use class orders could allow for a whole range of assets on the high streets – but that will involve turning highly constrained sites into flexible developments. Design will have to accommodate any of those uses and scenario planning is the only way to do it.
But the major changes are ultimately going to happen as a result of customer behaviour. As Simpson pointed out, amenities are changing. As well as instead of the pools, gyms and cafés seen in current BTR projects, residents will also be more interested in spaces to work, open spaces, community areas and ensuring their homes are sustainable.
Meanwhile, people have become used to the quiet streets and clean air that lockdown has afforded and, as Perry highlighted, pedestrianised streets are likely to become increasingly common. For Pedley there is an exciting change happening, and so much more will be expected from our public and shared space.
The working from home experiment has forced everyone to use their homes in a completely new and unexpected way, and there will now be a greater expectation for quality from residents. Going forward, buildings will have to be designed to draw out human connections through their different uses.