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Property Markets in the time of Covid - Autumn Webinar 2020: Bitesize

News article topics: Receivership, Training

Date: 11 February 2021

Property Markets in the time of Covid - Autumn Webinar 2020: Bitesize

Tarrant Parsons

At our Autumn Webinar 2020 RICS economist Tarrant Parsons gave the outlook for UK commercial and residential property for the 12 months from November, based on data gathered after the first 2020 lockdown – but before the January 2021 lockdown had been announced. He drew heavily on RICS’ renowned suite of market surveys which have a strong track record of accurately predicting trends. 
NB: Any forecasts made are subject to constant change during this period of high uncertainty and were notably given prior to the announcement of the January 2021 lockdown. However, the general outlooks described remain the same. 


GDP was estimated to be 3% lower by the end of 2021 than before the pandemic. This would be following the drop in output of 25% after the March lockdown and an estimated drop of 10% after the November lockdown. The fall would be despite Government policy to contain impact, including quantitative easing and furlough schemes. 


This was set to rise to 7.3% compared to pre-pandemic by mid-point 2021, translating to more than 1 million jobs lost. The numbers were unlikely to return to pre-Covid levels until 2023, an impact likely to weigh on consumer spending, the principal driver of UK economic growth.

Commercial Property

Commercial property investment was down a colossal 56% from 2019, with Q2 attracting just £4.6bn, the weakest quarterly figure since the 2009 global financial crisis. Q3 saw a slight improvement – £6.2bn – but indications were that a sharp fall to 2009 levels was likely.

Capital Values

Values across all sectors have declined by roughly 8% to November 2020 compared to 3% in 2019 according to CBRE. Predictably, retail bore the brunt, seeing a fall of 15%, with office values dropping a more modest 4% and industrial just 1%. Industrial had begun to retrace some lost ground in the following months, unlike the other two sectors. 

To note that retail saw a fall of 12% in 2019 compared to growth of just over 2% in office and industrial capital values.

Rental – retail

CBRE calculated commercial rents were down 2% by September 2020 and forward-looking sentiment recorded from RICS members indicated a fall of 4% to 5% by midpoint 2021.

The retail occupier market was in particularly bad shape, with demand from business looking to occupy retail space falling at sharpest pace since the late 1990s, and vacancies correspondingly rising at a record rate.

Rents are expected to fall by double digits for both prime and secondary real estate.

“Undoubtedly the latest economic and health crisis has come at a time when structural changes were already causing huge disruption to the retail sector. The pandemic has accelerated the switch to online shopping and left many shops unviable, especially with lack of footfall.”


Rental – office

Almost 95% of businesses said they were looking to scale back their office footprint in the coming 2 years. The two most favoured categories were to cut back between 5% and 10%, and 10% to 15% of space. As a result, rents are expected to fall – prime space by 5% and secondary by just over 7%.

“Occupier demand in this period has really plummeted due to changes to working habits brought by social distancing. This does look set to cause a lasting shift in how office space is utilised longer term.

“While we are not talking about the death of the office sector, if we were to see a reduction of 10% it would be a hugely significant shift in market.” 


Rental – industrial

The expectation is for industrial sector to move into positive territory due to structural forces such as the shift to online shopping, necessitating logistics sites and data centres as more work in conducted digitally. 

“Industrial provides good opportunities for investment once disruption from pandemic dissipates.” 



The residential market has seen an incredibly strong rebound in activity since estate agents were allowed to open branches in May in England. New mortgage lending for house purchases rose above pre-pandemic levels. In September, over 91,000 mortgages were approved in the strongest monthly total since 2007 and up 39% on September 2019. 

RICS market surveys indicated this buoyancy would continue to the end of 2020. This was remarkable given the macro-economic climate and was likely down to loose monetary policy, very low interest rates and most certainly the stamp duty holiday.

House Prices

Looking at key house price indices, prices fell by 2% and 3% accumulatively for two months after the March lockdown. But after that, the ground was made up, with the Halifax Index showing a rise of 7.5% and Nationwide reporting a 6% rise year on year. 

It is likely house sales will remain elevated in next few months and advancing to April 2021, it would be reasonable to expect house prices at a national level to be running at a rate of above 10%, subject to any further lockdown restrictions.

However, the end of the stamp duty holiday in March, the impact of higher unemployment and fading policy support pointed to house price growth “grinding to a halt” beyond Q1 2021, with a risk of increased arrears and repossessions and some price gain reversal.

“But I don’t think a house price crash is the most likely scenario as interest rates are going to remain at their current levels or even lower for several years, which will ensure mortgage affordability remains generally favourable and banks are much better capitalised than in 2008.”

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