UK Trends and Developments Contributed by: Colin Rodrigues and Harminder Sandhu, Hawkins Hatton Corporate Lawyers Ltd
Hawkins Hatton Corporate Lawyers Ltd Hawkins Hatton Corporate Lawyers Ltd
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With UK interest rates at a 15-year high and inflation out of control, it is no wonder that 2023 was a challenging time for the real estate sector, as the cost of borrowing increased and property values fell. This, coupled with a sharp decline in consumer spending due to the cost of living crisis, resulted in a very subdued UK economy. The real estate sector in the UK and, indeed, further afield has been reshaped by COVID-19, and the trends which emerged during the pan - demic continue to impact on property investors’ appetite towards certain categories of prop - erty assets. In particular, office space remains empty and underutilised as remote working has become the norm. Hybrid working is a primary means of attracting talent in an ever-decreasing talent pool, with the result being a continuing decline in the need for office space. Very simi - larly to the decline in the need for retail space (especially high-street), which started some time before the pandemic but never recovered follow - ing the surge in online shopping, in 2023 PWC reported that sales of office buildings are down twice as much as other property types.
The challenge ahead is how to repurpose both empty retail units and (now) office buildings. The costs associated with repurposing these vast buildings is often far too expensive given the backdrop of the stringent sustainability regula - tion, to the point that consideration will need to be given to large-scale demolitions, with land being available for redevelopment. With any distressed property market, there are always investors with capital waiting in the wings to take advantage of new opportunities. It is pre - dicted that the real estate sector will see a wave of increased activity in 2024 as inflationary pres - sures ease, and interest rates are forecasted to not only stabilise at a reduced rate but possibly decrease further. The only flies in the ointment are the following. Global Conflict The world is in a precarious position owing ini - tially to the Russia-Ukraine conflict and now the war in Gaza. The impact on supply chains in the construction sector has been a disproportion - ate increase in build costs, and this trend will continue, with no end in sight.
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