In the near term, rising Covid cases, including the new Omicron variant, alongside supply bottlenecks and rising energy prices, are the main risks to the pace of recovery, according to the latest UK Real Estate Outlook, published by property advisor CBRE.
On a more positive note, it suggests that consumers will be spending their savings faster than expected, therefore boosting consumption growth. The firm is predicting total returns for all UK property at just over 6 per cent for 2022.
The ESG agenda - environmental, social and governance - will continue to be a priority for the property industry, CBRE noted, with the tightening of regulation across all parts of the UK set to continue, as governments aim to make progress towards net zero emissions targets.
Demands for more precise and rigorous valuation of sustainability features will grow during 2022 as investors seek to identify buildings that merit a “green premium” and avoid those that suffer from a “brown discount”, experts at the firm argue. This is likely to drive more collection of sustainability data, especially energy statistics.
Miller Mathieson, managing director of CBRE Scotland, said: “In Scotland the real estate markets were perhaps a little later in opening up in 2021 relative to the rest of the UK.
“However, I am confident that the activity in the second half of the year indicates strong investor appetite across all sectors, resulting in a return to normal levels in 2022. There are some big deals due to complete before the end of the year that are good indicators of this.
“Whilst the challenges of the last year are not quite yet behind us, with the Omicron variant of Covid presenting new uncertainties, the property industry can still go into 2022 with a renewed sense of optimism.”
He added: “Alongside a real estate recovery, we can be certain that sustainability will take centre stage. Occupiers and developers across all real estate sectors are focusing on green buildings and it is evident that sustainability is also playing an increasing role in investor strategy.”
In the office market, take-up is expected to return to historical levels in 2022 driven by “healthy” levels of job growth and the release of pent-up demand. More flexible working patterns and an expected drive to attract employees back to the office will mean that occupiers place a greater emphasis on curating “work experiences” through integrated space, technology and service.
CBRE anticipates that the UK logistics market will remain strong with rental growth likely to continue throughout 2022 in all UK regions, despite Scotland still playing catch up relative to the rest of the UK.
A significant demand and supply imbalance will result in continued strong demand from developers and investors, the firm added.
For the retail property sector, recovery is already underway and CBRE expects this to continue. Improving footfall, retail and leisure spend in 2022 should strengthen the occupier market.