Midweek property news update - 19 May
Artificial Intelligence, the materials shortage and Landsec on the future of retail
4 minutes to read
The resilience of UK jobs, continued...
The Office for National Statistics said that payrolls had increased by 97,000 between March and April, marking five consecutive months of employee growth. The employment rate for Q1 rose 0.2% - the first rise since the beginning of the pandemic.
The numbers add to a growing body of evidence that the pandemic's impact on jobs has been far milder than initially feared. In a note to clients, consultancy Capital Economics suggested its forecast that the unemployment rate will rise to a peak of 6.0% by early 2022 may be too pessimistic. The Bank of England now expects the unemployment rate to peak at 5.5%.
It remains the case that the young have been the worst affected. A decrease in both the employment and unemployment rates for young people, particularly amongst 16- to 17-year-olds, suggests that more young people are staying in education and not looking for work. That is supported by the record economic inactivity rate of young people in full-time education.
The materials supply crunch
The On Site newsletter from Cenkos Securities (not online) picks up on the worsening shortage of construction materials, with reports in the trade press of suppliers who can't fill new orders until 2022, particularly in metal cladding and roofing
Meanwhile consultancy firm Arcadis tells clients in two minds about putting spades in the ground to get started. It says tender prices will rise 3% in 2022 in its 'Building' category, and 5% for Infrastructure and will largely continue that momentum right through to 2025.
We touched on this last month - the spring shutdowns of raw materials plants have combined with a reopening of economies to put developers globally under pressure. Housing starts in the US tumbled 9.5% in April as housebuilders delayed projects amid soaring prices for lumber and other materials.
Last month we published a survey of nearly 50 UK SME and volume housebuilders. Supply chain delays were identified as the third biggest constraint on delivery and were by far the biggest concern for SME housebuilders.
Artificial Intelligence
Covid-19 has accelerated investor appetite for life sciences. Equity investment into high-growth UK life sciences companies hit £967m in Q1 2021, more than any other quarter on record and 25% more than was raised across the whole of the first half of last year.
UK Government R&D spending is now at its highest level in four decades and Q1 2021 saw an additional 300 life sciences companies incorporated in the UK.
All this has big implications for real estate, writes Jennifer Townsend. In London there are extensive waiting lists for space at existing incubators and occupiers are gravitating towards sub-markets with concentrations of knowledge and research institutions and major teaching hospitals.
Expansion-led demand driven by funding is only one side of the growth story, however. The sector is transforming at pace, which we believe will also generate significant disruption-led demand, most notably from Artificial Intelligence. You can read more our new UK Life Sciences report, out now.
A brighter European outlook, continued....
After a lacklustre start to its vaccination campaign, we have been tracking the turn in the eurozone's economic fortunes. A range of high frequency indicators tallied by the FT suggests the recovery is now taking hold.
The number of job openings are rising across all major eurozone economies, according to data from the job site Indeed, and rising holiday bookings all suggest that economic activity is bouncing back. In the week ended May 15, bookings on websites Airbnb and Vrbo were only 4 per cent below the same week in 2019.
The eurozone shrank by 0.6% in the January-to-March, though consultancy Oxford Economics expects the economy to have returned to growth in the second quarter, with an expansion of 1.5%. European Central Bank policymaker Klaas Knot last week said economic growth for the full year is now likely to overshoot the 4% expansion currently forecast by the ECB.
The future of retail
Following publication of the company's full year results, Landsec CEO Mark Allan tells the FT that shopping centres are "back on the agenda", adding that declines in values are now approaching the level at which the company believes they are sustainable.
It's worth reading the full results for a fuller picture of how retail is likely to develop over the coming months. Mr Allan says the pandemic accelerated structural trends that were already underway in retail, adding that it is clear that online is now the primary growth channel and will remain so.
"This does not, however, signal the end for retail property," he adds. "Instead, it means that its role must change in an omnichannel world to offer something sufficiently compelling – either to be complementary to online or to offer something that cannot be easily replicated online."
In other news...
After our first issue in 2020, we’re following up with a new edition of VIEW for Summer 2021, bringing you the latest global market forecasts and outstanding properties.
Elsewhere - beware the looming net zero car crash, Ballymore commits £20m to fix cladding, Standard Life Aberdeen staff to have home emissions monitored, Boris Johnson announces urban renewal plans after promise to "level up", ancient Swedish hamlet holds lessons for the future of clean power, and finally, Ireland to raise tax on the bulk buying of homes.