28 December 2021/ Guides

Commercial real estate trends for 2022

Almost every sector was heavily impacted by Covid-19 in 2021, and commercial real estate was no different. With home working prescribed by the Government at the beginning of the year, office space felt temporarily redundant for many. While some enjoyed having home comforts, others missed having a central place for people to come together as a team.

So, what’s going to be the commercial real estate story of 2022? Will businesses be returning to the office with renewed energy, or will we be more tentative? And what about the retail and industrial sectors?

We dive into the stats from 2021 and the emerging themes to give you a clearer picture of where we could be headed.

Real estate as a service (REaaS) develops

We can already see signs that hybrid working – where businesses mix office use and home working – is here to stay in the UK. According to research conducted by the Chartered Institute of Personnel and Development (CIPD), 40% of employers expect more than half of their staff to work from home on a regular basis even after the pandemic diminishes.

To adapt to hybrid working, businesses need access to office space but may not want it 100% of the time – or to pay for 100% use of it. This is where real estate as a service (REaaS) comes in. Businesses can sign up to membership packages where a certain number of people can use the space each day, enabling either select team members to work from the office or a more flexible arrangement for an entire team. We expect the REaaS model to strengthen both in design and number.

Demand for prime office space will grow

When people only use the office a few days a week, businesses want the experience to be a special one. Not only that, but employees need a welcoming place to tempt them out of the convenience of the home and back into the office. Demand for prime office space is already rising in big cities, like Manchester, Leeds and Glasgow, and we expect to see this trend continue.

It’s also worth noting that prime office space will, for many businesses, need to follow sustainable practices. Discussions at COP26 earlier this year highlighted the need for much swifter and tougher action on climate change. Lots of businesses will now look to implement a robust carbon reduction strategy, and this will no doubt involve using office spaces that will help them cut their carbon footprint to meet targets.

A greater focus on technology

If businesses are to create a hybrid set up, they will need technology that enables them to do so. This could be anything from collaboration tools to video software that makes calls with multiple people more seamless. Employees will also want to be able to plug in and get started easily both at the office and at home.

A Deloitte survey found that 75% of businesses will either partner with or invest in property technology (PropTech) businesses. In many cases, employers will look into upgrading their IT to better support hybrid working. But in other cases, employers will expect their landlords to provide this kind of service, which could make office space even smarter in the coming months and years.

Repurposing traditional office space

Although trends suggest that office space will become more high-end and high-tech, some offices may need to reimagine themselves altogether to stay profitable. We are already seeing this trend in non-office buildings, such as hotels transforming into affordable housing and former industrial buildings becoming luxury apartments with shops and restaurants at ground level.

If office space decreases in demand, some owners or investors may look to change its use into a gym, bar or supermarket store, for example. This trend could be particularly lucrative in places with high footfall.

Demand for storage will increase

Supply chain issues have hugely affected businesses across the UK and they’re going to be disrupted for some time yet. In fact, the Financial Times reports that we shouldn’t expect supply chains to return to normal until 2023, at the earliest. Not only that, but the UK is seeing a great uplift in online shopping. Between January and November 2021, online retail sales ranged between 37.7% and 25.9% of all sales.

Both of these scenarios are pushing demand for storage space even higher. Online retailers need space to hold goods, while supply chain difficulties mean that businesses are stockpiling. Demand for storage will only remain high through 2022. We could even see some spaces, like office spaces, converting into storage facilities.

Demand for data storage will also rise

Businesses across the UK have gone through digital transformation processes in recent years, and many companies have accelerated their plans in response to remote working. All of these digital developments will only increase businesses’ need for data centre capacity. And as more businesses migrate to the cloud, many will also look to move away from the expensive public cloud to more cost-effective private storage.

The need for data centres has never been higher. We anticipate the demand to grow, which could mean that more spaces are repurposed into data centres or an increase in purpose-built centres.

Retail becomes more localised

Declines on the British high street has been in the headlines for a few years now. Even in the 18 months before the pandemic hit, retail rental values were falling. These continue to fall, but it’s not a blanket drop – some areas are doing very well.

In particular, suburban areas have enjoyed success. One knock-on effect of lockdowns was that many people felt more comfortable shopping in smaller places. Likewise, many people were working from home and therefore visited their nearby shops much more often. As a result, independent, local shops have largely retained their high levels of footfall. If this remains the case through 2022, independent businesses may start looking for larger premises, while new businesses that are cheered by the buoyant local high street could search for their first premises.

Another emerging trend on local high streets is the rise of pedestrianisation. This comes as towns and cities seek to create clear air zones and enable people to walk more freely around some streets. The impact could be significant for retailers and those in hospitality. It could generate more footfall in some areas and give restaurants, cafes and bars the opportunity to offer seating outside to grow their revenue.

Learn more

Check out Realla’s blogs to find out about the newest trends in commercial property throughout 2022. And if you’re looking for your own premises to get the next year off to a great start, begin your search right here.