The mood among UK property investors is fearful as Covid-19 has
put particular pressures on them in office, retail and buy-to-let properties.
ban on terminating leases for non-payment has caused severe short-term
financial pressure for many. Some investors are even concerned about the
long-term future of commercial property as an investment-grade asset.
Some fear that reduced demand for retail space may become
permanent. Even before Covid-19 hit, the high street was under severe pressure
as shopping moved increasingly online; this trend has been rapidly accelerated
by the pandemic. Rental income streams have dried up as businesses closed and
This trend may change typical retail leasing arrangements. The
leasing of smaller units for shorter terms may become commonplace. Rents could
increasingly be based on a percentage of turnover. Such market changes will
ultimately alter rental returns and asset values.
in the office sector, the pandemic has caused a massive shift towards working
from home. Many organisations found this enforced experiment to be very
successful and plan to continue flexible working even after the pandemic ends.
Only time will reveal the full extent to which UK office working becomes
remote. For now, large office developments will likely remain unattractive to
In the buy-to-let investment market, rising property prices show
that the UK has a massive unmet demand for homes. Residential landlords have
nonetheless been badly hit by the government’s ban on the eviction of
non-paying tenants – even where they can pay. Many landlords see this as a
charter not to pay rent. Despite reduced returns, the fact that asset values
are holding up gives some comfort.
The government is proposing major changes to the planning system
to increase the supply of residential property. This may mean that
greenfield and brownfield land that is available for residential development
becomes significantly more valuable for investors in this market.
Peter Robinson is a partner at Hunters Law