What now after Draghi, WeWork and Thomas Cook? – The Property Chronicle
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What now after Draghi, WeWork and Thomas Cook?

The Analyst

Could this year be an inflection point for three key structural trends in the UK and European real estate markets?

The evolution of the European real estate markets is increasingly being influenced by structural trends, in particular the shift to multi-channel distribution, the future of flexible space and the increasingly negative interest rate environment. Technological changes in particular are an important driver: they have not only made a mark on the habits of the younger generations but also seem to be reshaping the behavioural patterns of society in general. The nearly all-encompassing use of mobile phones has changed the way we work, shop and live. 

The real estate industry seems to be a late convert to technological progress. It does not rely explicitly on technology and entails informal processes resilient to change, such as the broker-based model for trading commercial real estate. However, consumers have always mattered in real estate. It is not the aesthetics of a building – my apologies to all architects – that drives the value of real estate, but rather the services or goods sought after at a specific location.

The rise of co-working and flexible space, a trend indirectly driven by changes in technology, has changed office markets. In Amsterdam or London, roughly 5% to 6% of office stock is currently occupied by flex space providers, as the more flexible use of space has brought efficiency gains and greater client value in the leasing market. Other cities, while still lagging, seem likely to catch up soon. Technology has also changed the retail and logistics real estate markets, as more than 18% of retail purchases in the UK and 10% on the continent are now done online. As a result, the prospects for retail real estate have become more clouded, but demand for logistics space is rising.  

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