Captain’s Blog – Space Shifter

COVID has made all of us look at things afresh and despite impending economic gloom it seems many companies are actually thriving. Barratt Developments, the bellwether of the housing market has announced that sales between July and October were up 24% on the same period last year. No doubt stamp duty suspension on sales below £500,000 has helped but there may be other factors at play. Just Eat is now worth three times more than Sainsbury’s as more of us have our fast food delivered rather than shop for basics and cook them. In the wider corporate world Goldman Sachs has had its best quarter in ten years whilst Apple which took 19 years to get to a market cap of $1 trillion has in the last nine months reached $2 trillion. 

Clearly not all sectors are doing well. IAG (owner of British Airways) has lost two thirds of its value in a year and other travel stocks are in similar trouble. The hospitality sector is on its knees with many outlets closed (some never to re-open) whilst high street retail seems doomed at least as far as the large department stores are concerned. Some sectors thrive whilst others suffer so what does this mean for our industry.

It points to a fundamental change in the way that real estate needs to adapt to serve what is a rapidly evolving world. Vast swathes of office space lie empty as people work from home. Parts of their homes have been adapted to offices. Shopping centres are being bought to be demolished and used for new housing and even the logistics sector – the area of real estate which every investor wants a slice of – is looking to move on. You’ve heard here of clicks and bricks to describe retailers with both a high street and on-line presence? How about beds and sheds to describe how logistics parks of the future will incorporate housing in the airspace above the warehouse. In Kings Cross Travis Perkins has teamed up with Unite to put student housing above a trade outlet whilst in Hayes SEGRO and Barratt are looking at a scheme together which will see a 12 acre site on which industrial space sits side by side with housing. In city centres offices already have coffee shops and retail outlets at ground floor level, how long before some of the upper floors are repurposed as flats? Hotel companies like Rooms2 now offer ‘aparthotels’ where guests can stay for a night, a week or indefinitely, blurring the lines between house and hotel – indeed their branding refers to a Hometel. ‘Use Classes’ drawn up by planning professionals to denote what property can be used for are blurring at the edges and as a result are being re-drawn to reflect what is happening and what needs to happen in the real world.

Real estate has traditionally been sticky, refusing to morph into a new version of itself often because landlords are protected by long leases with upward only rent reviews meaning there is little incentive to change. That is no longer the case and as change in the world speeds up so must real estate adapt. As the Philosopher David Kirkwood said ‘Those who resist will be left with assets which will soon look a lot like liabilities’.