In 2020, when it got to July and lockdown began easing, commercial property owners breathed a sigh of relief as a 3.6% rise in UK retail sales demonstrated the resilience of a pent-up demand, even as social distancing measures were in place. Consumers were beginning to buy items as they did before the pandemic even happened, which was incredibly promising to see.
In 2021, a similar pattern could be seen as in the early stages of lockdown easing, when only high street shops were open, figures were incredibly strong. That being said, when May came around and the hospitality sector opened up, retail sales began to fall.
There is a lack of consistency in retails rise also represented in the sharp increase in Amazon’s share price that occurred throughout the pandemic. Such substantial growth suggested that investors didn’t see the boom in online sales as a short term response to lockdown and was in fact a reflection of a change here to stay.
It seems that this dip in retail sales is most likely a result of habits picked up in lockdown outliving lockdown, leading people to ask where else this could possibly occur? Of course, many believe the same will apply to working from home or hot-desking, putting question marks over whether income from Commercial Property investment still adds up. 2021 may be an incredibly prosperous year for retail property investment, but can the same be said for commercial?
New Attitudes Towards Working
At the beginning of the pandemic, many struggled to adjust to their new working from home situation. However, as time progressed, the benefits soon started to reel in. People didn’t have to worry about traffic during rush hour, they could start and finish work early and there was flexibility to do tasks like take the kids to school, go to the doctors and shops.
Companies also found that they were able to run sufficiently from home, leading them to wonder whether or not this could be a permanent solution. Certainly, reducing office size or getting rid of the need for an office altogether would have a positive impact on the company’s outgoings. As such, some of the largest companies in the world are now beginning to implement this, including Ford, Twitter and Target. So, where does this leave commercial property investment?
What Should Commercial Property Investors Do?
Even as the UK gently eases out of lockdown and the vaccine continues to be rolled out, there are reasons to believe that working from home, if not full time, then at least part time, may well be more than just a passing fad.
The first reason is for public safety. There is concern surrounding an increase in cases thanks to the new Delta variant, paired with a hesitation for any further lockdown restrictions to be placed. As such, some employees may decide they would rather not return to the office whilst case numbers are rising. This also takes the strain off of socially distanced public transport.
Not to mention, the general benefits discussed above will also be a contributing factor as to whether or not businesses are likely to return to the office. Ultimately, commercial property owners and investors, in order to recuperate from a potential lack of demand for retail and office space, will need to bring some imaginative solutions forward in the coming months.
Some proposed fixes recently put forward has been that of turnover related rents, essentially using the unused spaced as a bargaining chip for tenants. Another solution could well be to rent holidays until restrictions are entirely back to normal and companies can properly assess whether they would like to return to the office or not.
These will all be options that should be discussed with landlords once conversations surrounding rent and leases occur.
Should You Invest in Commercial Property?
One of the things that commercial property investors need to remember is evidenced by people’s reactions to shops and pubs reopening. Yes, whilst people may continue to shop online, the high street is seeing sales again and stores have stopped closing. Yes, whilst we got used to having people round rather than going out, the pubs are full. The fact is, old habits die hard.
Though there may be a slight shift in people’s attitude towards office life, chances are, when people can return to the office, a majority of them will. Long term office leases will certainly not be a thing of the past and to make up for the deficit that commercial property owners may see, the solutions above may well suffice.
The yields on real estate investment are more than likely going to remain highly competitive as oppose to the income that’s available from the government and corporate bonds. As a result of this, commercial property investment will more than likely retain its appeal.
That being said, investors have every right to be concerned regarding a potential dip in income due to a newfound working from home culture that many organisations have discovered amidst the pandemic. As such, if you have any questions about commercial property investment that you would like to discuss in more detail, you should contact experts in property investment, who will be able to address all your queries.
Cengizhan Cerit is a Turkish/British businessman. He has a long-standing and successful career in both residential and commercial property maintenance, property investment and entrepreneurship.
He leads two property management firms, SISI Property Ltd and Meden Ltd that he operates out of Ashford and London. With his strong interest in culture and business sectors, he continues to successfully develop both of these property firms.
Cengizhan Cerit is constantly updating his website with regular content covering all aspects of property investment, management and entrepreneurship.