“Social distancing is the antithesis of city life!” proclaimed Tony Travers, our modern-day Dr Johnson and staunch defender of all that is great about London even in these strained pandemic times, calling for a range of post-COVID ‘welcome back’ events incorporating the arts and public spaces.
As our expert panel debated recent headlines around the potential death of cities and large-scale flight to the suburbs, Tony acknowledged the painful economic impact of COVID-19 on London but highlighted the capital’s proven resilience as “it tends to fall further into recessions but recover faster.”
Mark Allnutt, Senior Managing Director at Greystar noted that the additionality of existing residential supply to enable long-term and large-scale population moves simply doesn’t exist in the UK regions and highlighted the significant imbalances of supply against demographic trends such as single household formation even if migration is, for the time being, dramatically reduced. Echoing the resilience theme of our whole session, he noted that “residential can handle challenging times” and that the insatiable appetite of UK and overseas investors for UK residential property showed no signs of slowing.
Debapratim De, Senior Economist at Deloitte also provided surprisingly optimistic data from a recent Deloitte CFO survey citing that “business optimism is actually at a 12-year high!” thanks to the success of the UK vaccination programme and a collective breathing out as the risk of a no-deal Brexit finally receded. However, the significant blindspots of the current Brexit deal; which does nothing for the services economy that is so critical to London and the UK more widely, highlights some serious potholes in the road to recovery, particularly around supply chains and regulation such as passporting for financial services. Debapratim also sounded a note of caution around seeing technology as a panacea, whilst acknowledging the Work from Home revolution was likely to lead to a shift of at least 25% of the workforce to more permanent WFH practices, noting that the “existence of tech doesn’t mean that it will be used…” either correctly or collectively. All of us who’ve endured weak broadband crashing a Zoom or Teams meeting or had to patiently wait for someone to navigate how to share their screen could sagely agree with that point.
Our panel moved on to exploring the policies around reinventing the beleaguered UK high street. Emma Cariaga, Joint Head of the 50-acre Canada Water Development at British Land, gave a comprehensive overview of one of the largest UK regeneration projects and how they have had to juggle and futureproof inherently illiquid assets amidst the buffeting winds of Brexit uncertainty and a series of pandemic lockdowns. Emma highlighted the “priority of experience” and asserted that “the future has to be (mixed-use development as) a market stall that allows for a rapid reallocation of deckchairs on a daily basis – sometimes even more than once a day!” Tony cautioned that “random planning incursions could damage high streets,” and actually inhibit that vital flexibility and adaptability that Emma had outlined.
We received a significant number of audience questions around the relative importance of ESG (Environmental, Social and Governance factors) and some definite scepticism around the seriousness of investors around this latest real estate trend. Mark emphatically stated that “ESG has moved from the back to the front of the investor deck” and underlined how investor expectation had radically shifted in the past 12-18months around the level of detail now required in terms of analysis and monitoring. Mark noted that initial market assumptions that the pandemic crisis would divert attention away from ESG had been proven wrong, highlighting how the issue of air quality “…often 5x worse indoors…” was now, rightly, a top priority.
It was somewhat mischievous of me to suggest an audience poll of which city regions might see the strongest growth in 2021 but amidst all the post-COVID recovery policy clamour around Levelling-Up and Reviving Regions I was fascinated to see what the LREF audience were actually seeing happen. London strongly topped the poll with Manchester, Birmingham and Bristol retaining their regional hotspot status in terms of investment prospects. The panel agreed that policies around ‘Levelling-Up’ the regions should not be ‘Levelling-Down’ in terms of incurring further damage to our capital.
Alex Notay, Placemaking and Investment Director, PfP Capital