2024 outlook: What can the property industry expect for the year ahead?
Read on for insights and predictions from a number of our thought leaders…
Matthew Pateman, Managing Partner
Against a backdrop of continual change over 40 years of Workman’s history, one constant is our commitment to investing and progressing future talent. From our graduate and apprenticeship schemes, which continue to attract a diverse range of talented individuals, to our specialist hires such as the experts who have joined our ESG team over the past few months, or the professionals who have bolstered our building consultancy and property management teams, we continue to put people at the heart of our business.
Nurturing our people and equipping them with the tools to harness innovations – for example in property management systems and intelligent building technology – is key to delivering accurate and consistent results for the future success of our business. Technology will continue to form a key pillar of progress, though we are keenly aware that it is best harnessed as a co-pilot, affording our people the time and energy to get closer to our clients, enhancing the services our teams deliver. Identifying how best to continue do this to our clients’ benefit, will be a priority in 2024 and beyond.
Indeed, the capabilities afforded by new technologies are allowing us to genuinely advance towards our clients’ goals for creating energy-efficient assets that are not only environmentally sustainable, but crucially deliver returns in the future. As an industry, we have a fantastic opportunity – and challenge – to combine the best of our talent and technology for the benefit of the wider community.
Gareth Soar, Partner, Head of Retail & Leisure
As featured in Retail Destination
Despite the UK’s shallow recession, retail has remained resilient with rent and service charge collection rates reverting to pre-pandemic levels. Nonetheless, this resurgence has emerged unequally across sub-sectors. Retail parks are continuing to perform strongly – delivering strong returns to investors, and increasing demand for existing schemes. Although shopping centre valuations have reduced, vacancy rates are dropping and footfall is gradually returning.
Looking forward, investors have begun to purchase at what they perceive to be the market’s nadir, reviving non-viable schemes via proactive asset management. Though the last 12 months have seen a decrease in rents, we believe that these have now bottomed out and investors are expecting that they will marginally re-bound. We expect these transactions to continue throughout early 2024, despite further shocks in the broader market.
Operationally, the energy crisis continues to impact retail. Though utilities costs have begun to stabilise, we’re conscious that for some schemes energy expenditure now forms a significant part of the service charge, which can quickly overshadow efficiencies gained from property management. Asset managers are, therefore, now looking to mirror efficiencies achieved in other sectors, notably offices. To deliver this, our proptech teams are working with clients to quickly rollout intelligent building management systems aimed at eliminating out-of-hours spikes and reducing overall energy usage. Broadly, retailers are also struggling with cost inflation, particularly F&B and leisure operators who are operating within a constrained labour market – while, in general, many landlords are frustrated with the lack of progress in business rates reform, and by the lack of direct support offered within the Autumn Statement.
Strategically, while demand for some physical retail remains strong, clients are now looking for advice in delivering alternative uses (including residential and logistical units) in locations over-spaced for retail.
Gareth Soar, featured in Retail Destination
Vicky Cotton, ESG director
As featured in Sustain RE
As we begin 2024, proptech is soaring up the priority list for many real estate businesses seeking to take action to achieve more sustainable operations.
Smart technology presents the definitive means of shifting from a ‘business as usual’ approach to managing commercial property, to educated and considered operational improvement or ‘managing for performance’ – the exact focus of the Better Buildings Partnership framework. I was proud to help develop and launch this month. This sort of industry collaboration is coming into sharper focus as we drill into the more challenging decarbonisation processes that falls under Scope 3.
2024 should see more meaningful progress in this area, specifically concerning the emergence of technology that can fast-track data sourcing, since a critical element of ESG progress centres on having the intelligence and detail to make and measure the impact of changes. We are finally seeing progress in the installation of smart meters within tenants’ demises too; further evidence of a more collective cross-sector decarbonisation drive.
ESG is now a firm priority across the investment community. Today we regularly see investors superseding regulatory requirements and government policy in pursuit of their own – more demanding – net zero investment criteria. As this becomes more engrained, my hope is that the focus will go beyond point-scoring, and further towards performance improvement at every level. This is the truest form of collaboration after all.
James Hallworth, Partner, Head of Building Technology
In the ever-evolving landscape of real estate, 2024 promises an upward gear-shift for the rise of intelligent proptech. As technological advancements continue to redefine urban living and working, the integration of artificial intelligence (AI) and smart technologies into property management and retrofit projects is poised to revolutionise the way occupiers interact with living and working spaces.
One of the key trends driving this transformation is the increasing emphasis on energy efficiency and sustainability. Our intelligent building operating system is already playing a pivotal role in optimising energy consumption within buildings, analysing data and automating systems for maximum efficiency. From smart lighting and HVAC systems to advanced waste management, buildings are set to become ever-more environmentally conscious and cost-effective.
The integration of Internet of Things (IoT) devices will be another hallmark of building technology in 2024. Building sensors and connected devices will create a network of information, enabling real-time monitoring and predictive maintenance. This proactive approach will not only enhance the overall safety and security of buildings, but will also reduce operating costs by identifying potential issues before they escalate.
What’s more, occupier experiences will be elevated to new heights through personalised and responsive technologies that are being implemented beyond workspaces. Across retail and leisure spaces, residential build-to-rent accommodation units and later-living homes, intelligent proptech is transforming buildings into intelligent, responsive entities, creating an environment that seamlessly aligns with occupier needs.
As buildings become smarter, more efficient, and tailored to individual needs, the integration of AI, machine learning, IoT and intelligence-automated technologies promises a future where the places we live and work actively contribute to a sustainable and connected urban environment.
Richard Hart, Partner, Head of Property Management
As featured in BE News
It’s no secret that many institutional investors are looking to dispose of some assets during 2024 and we can expect new, less traditional, entrants to invest in a broader range of assets than may previously have been accessible to them.
With different funding scenarios and investment horizons, these purchasers have very specific business plans to deliver. In retail, we’ve seen local authorities invest in town centre assets for several years, while in offices we’re increasingly advising various purchasers with ambitious plans to repurpose assets into something different.
The role of property managers – both during the due diligence process and then to make a success of the investment post-acquisition – will be crucial. A clear grasp of the business plan, close relationships with occupiers, a forensic understanding of future non-recoverable and capital expenditure, and a flexible approach to financial reporting, will be key to successfully delivering and futureproofing these new investors’ plans.
Richard Hart, featured in BE News
Ben Kearns, Partner, Head of Venture, Workman Projects
As the UK’s student population continues to grow, and students face an increasingly tighter private rental sector, we’re seeing a diverse group of investors entering into the PBSA sector.
Operating within an unpredictable planning system, which aggressively protects Green Belt and agricultural land, clients are prioritising dense residential schemes, that offer high-quality amenity provision and architectural design, in brownfield locations. Though all university cities are growth markets, we are seeing demand particularly rise for Russell Group and Oxbridge locations – where supply of PBSA has historically lagged behind population growth. Within brownfield locations, a two-tier market has emerged with many investors willing to pay a premium for inner-city locations or sites close to public transport connections.
Strong ESG performance, demonstrated by recognised accreditation schemes, continues to be an investor priority – such as Stanley Studios development in Portsmouth which we recently delivered at BREEAM ‘Very Good’. However, due to site constraints, meeting investor BNG requirements has occasionally become challenging, incentivising the use of external BNG credits.
During the development stage, complying with the Building Safety Act has had a significant impact on project delivery. The introduction of the ‘Golden Thread’ is requiring a greater focus on collaboration, and transparency, from all members of design teams and supply chains; while residential design teams are dealing with the onerous requirements of the ‘building safety regulator’ role.
Importantly, we’re seeing the requirements of institutional investors, and their insurance policies, driving safety procedures beyond the statutory requirements of the Building Safety Act, particularly within higher PBSA schemes that may fall under the ‘higher-risk’ category. This can be seen in the wider roll-out of sprinkler, and fire suppression, systems to smaller schemes, that may not currently be required by legislation to have sprinklers installed. Alternatively, we’re seeing clients consider schemes at less 11m tall, but with a greater density of rooms to ensure project viability.
Matthew Osborne, Partner
As developers, landlords, and occupiers increasingly prioritise assets within prime locations – especially sites with immediate public transport access – interest in evaluating retrofit options for City & West End assets has grown.
Many are now placing a measurable premium on schemes with strong design principles, alongside the high amenity provision that has been demanded by occupiers since the pandemic. Aiming to maximise returns within each asset, clients are continuing to pursue NIA maximisation strategies; asking surveyors to explore floor plate efficiency, adding additional massing to any building is now standard as part of a due diligence survey. Since the enaction of the Building Safety Act’s registration process, we are now also supplementing this due diligence work with dedicated fire safety surveys – with Workman team members currently instructed on 25 different assets.
Within new floor plates, designers are being asked to deliver more open, less cellular spaces, to enable flexible working models, supported by more collaboration and breakout spaces – alongside dedicated individual work booths, and meeting bars. Within more constrained floor plates, we’re seeing developers aim for an occupation density of 10m2 per person, in-line with the BCO’s new guidance. In smaller assets, many occupiers expect office space to be fully fitted, supported by high-end fibre cabling, which landlords are keen to advertise via accreditations like WiredScore.
Though developers have faced a rough 2023, with a constrained labour market and supply chain disruption causing significant cost inflation, we’re beginning to see the zenith of these price rises, and fit-out costs appear to be stabilising for Q2 2024. Crucially, developers are beginning to see cost savings from proactive tendering processes.