Our Outlook 2023 report series provides perspective on how global events, trends and indicators impact commercial real estate in a variety of sectors across the UK.
- Inflation is expected to ebb in 2023, but only gradually and to levels that are still high by historic standards.
- Interest rates are expected to peak in Q1, but then remain at that level throughout 2023, and into 2024.
- Consumer-facing real estate will face a difficult market in 2023, but it could become an area of opportunity in 2024 and 2025.
- A stronger UK economy predicted for 2024 onwards would bode well for distribution warehouses, due to the rise of ecommerce, and the housing market.
- With many buyers currently on the side lines, afraid of ‘catching a falling knife’, we believe prices softening in early 2023 is highly likely.
- The extent of the price correction will vary according to quality and location, with prime assets holding up better than secondary stock.
- A significant amount of the opportunity fund money that was raised during the pandemic has not yet been deployed, providing a waiting pool of dry powder.
- We are predicting opportunist capital and well-funded investors with long-term horizons to begin to re-enter the market from Q3 onwards.
- Robust occupier demand expected to continue into 2023 as lack of available stock continues to be a hurdle for occupiers but the sector will face continuing challenges from rising costs of materials, labour and energy.
- Nearshoring of operations could spur an increase in demand for space as frailties of global supply chains are increasingly coming under review.
- New build stock will continue to have a heavy focus on ESG credentials, as companies move towards their own net zero carbon targets.
- The sharp rise in the cost of mortgages will cause house price growth to decline by 10-15% next year with London and the South East more exposed.
- The deteriorating outlook for the housing market will impact new housing starts next year and we may see policy intervention aimed at assisting access to homeownership.
- Rental growth prospects are good and this will underpin long term demand for residential investment but high cost of capital and build costs will mean the year gets off to a slow start.
- Retailers will continue to rationalise estates as they seek to move to locations which fit in with their future growth strategies.
- The cost of living crisis will leave discretionary household spending squeezed, impacting lower income households more disproportionately.
- There could be an uplift in the number of shoppers returning to physical locations as the online share of retail sales continues to decline with consumers opting for more experiential retailing.
- Hospitality will be hit by labour issues, rising costs and declining consumer spend although the impact may not be as severe as in previous recessions as consumers are likely to place a higher importance on their social wellbeing.
- The UK could benefit from a double-pronged upswing in revenues from tourism, from consumers forgoing overseas holidays in favour of cheaper UK staycations combined with an expected increase in the number of overseas tourists.
- As an industry that constantly reinvents itself, we expect to see new formats emerging to provide new offers to accommodate changes in the market.