For many, January is a time of reflection. This time last year many in the development industry had high hopes that the Levelling Up and Regeneration Bill and expected planning reforms would lead to a welcome boost for the sector.
Fast forward twelve months and those hopes have been dashed due to a perfect storm of organised Tory backbench rebellions, two DLUHC Secretaries of State and a revolving door of five Ministers – with responsibility for Housing and Planning – taking up office during this time due to the well-documented political upheaval at Westminster.
So, what next for the development sector, and where are we going to see the green shoots of growth? We are entering the year under the triple spectre of a moderate recession, stubbornly high inflation and rising interest rates – all placing downward pressure on growth and making businesses and consumers nervous and reluctant to invest.
According to the CBRE 2023 market outlook, transaction volumes will fall in 2023 with investors and developers adopting a ‘wait and see approach’ after being burned by global events and political instability throughout 2022.
While the overall economic outlook might be bleak there are some sectors in the built environment that are proving more resilient than others. We look at what might be in store for them during the rest of 2023:
Retail and Supermarkets
The retail sector will not be immune to economic headwinds in 2023. However, it is expected that there is room for modest expansion for well positioned occupiers such as the discount supermarkets. They are benefitting from revolutionised retail habits driven by the cost of living crisis and have ambitious plans to continue growing their market share.
Some retailers had hoped to capitalise on the Investment Zones proposed by Liz Truss, however this policy has been substantially watered down by the current PM. The onus is now on local authorities to provide fertile areas for development, while providing quicker routes through the planning system so retailers’ expansion plans are not curtailed.
Build to Rent
With mortgage rates remaining well above where they sat prior to Kwasi Kwerteng’s disastrous financial statement in September many prospective homeowners hoping to buy are holding off, fuelling continued growth in the rental sector.
This is resulting in strong occupier demand for Build-to-Rent and Co-Living across the country with many operators, big and small, planning significant investments for 2023.
The buoyant BTR market is helping to fill the gap with the lack of new homes being built, this coincided with DLUHC removing their national housing targets after pressure from the back benches.
The brownfield first approach to new homes, favoured by the Government and originally driven by the NIMBYs, suits the BTR sector across towns and cities so they should be well positioned to grow in 2023.
Film and TV
The UK Film & TV Studio Market has been experiencing somewhat of a boom with supply insufficient to keep pace with the rising demand for new content from broadcasters, studios and streaming services.
For many years, the UK has proved popular as a base for screen production with the Government hailing it as a major UK economic success story. Seen as a key area to achieve growth, they are supportive of future investments.
Government support, surging rents and rising capital values continue to drive new investors into the market. With some 60% of the current production stock focused on London and the South East, there are opportunities for other parts of the UK to grab a slice of this lucrative market.
The strength of the logistics sector is demonstrated by the critically low vacancy rates across the UK. The sector, like many others, is facing a workforce crisis and the Government needs to act soon to drive down vacancy rates for drivers – reports show that the haulage industry needs around 50,000 drivers at present. The Government launched its ‘Generation Logistics’ campaign last year but progress has been slow.
As consumers re-evaluate purchases, it is likely that the pace of private consumption, supplied by the nation’s logistics sector, will remain resilient and reinforce its position as a major contributor to total UK real estate investment during 2023.
For more information, or if you would like advice on how we can help you navigate the political and policy landscape, get in touch with Matthew Morrison: email@example.com