Real estate has become interesting again, delegates heard at Real Asset Media’s Re-setting Real Estate: Covid-19 and the rise of ESG and social purpose briefing, which was held online on REALX.Global.
“The pandemic has speeded up trends and magnified the problems we face as a sector,” said Clare Thomas, Partner, CMS. “It has also led us to think more deeply about how we use our buildings and about the environmental and social impact of real estate.”
Thomas presented the 8th CMS annual report, Re-setting Real Estate, for which hundreds of RE professionals were surveyed and occupiers of all sizes were polled, from SMEs to multinationals, to track and highlight the changes that are occurring in the sector.
“When it comes to asset classes there are obvious winners and losers, with distribution and logistics way out in front (84%) and retail at rock bottom (3%),” she said. “PRS and healthcare are up, while interestingly offices, which used to be at the very top, have dropped out of the top 5 for the first time since we’ve been doing the survey,” Thomas said.
It is important for investors to distinguish between long-term trends which have been accelerated by the pandemic and reactions to the pandemic which are likely to be reversed as the health emergency recedes.
“Hotels, leisure and student housing have really suffered this year, but that is totally out of sync with what we have seen over the last few years so they are likely to bounce back,” said Thomas. “Logistics has been a favoured asset class for a long time, but retail has been declining for years.”
Jury out on offices but blended approach on the way
The jury’s still out on offices and what their future is likely to be. We need buildings to work in, but not necessarily offices as we know them. The CMS survey shows that the blended approach is favoured, with half of respondents expecting to work more from home but wanting to return to the office for some of the time.
“The pandemic has reminded us all of the buzz and energy we get from human connections,” said Thomas. “Integration with colleagues is best for creativity, productivity, innovation and motivation.”
People want to return to the office at least some of the time, but there are concerns about health and safety.
“The way we use offices will change, with more emphasis on health,” she said. “The S in ESG is often overlooked, but in future there will be more attention paid to the social impact of offices.”