The future of property development finance

The impact of Covid-19 on people’s everyday life is almost immeasurable. Every facet of society has been deeply affected by either the virus or the economic repercussions stemming from it.

Related topics:  Commercial,  Commercial finance
Paul Howells | CEO of Accumulate Capital
18th September 2020
Paul Howells Accumulate Capital

What warrants close attention, however, is how the pandemic has impacted the way businesses, financial markets, and investors are behaving. While the UK government provides economic stimuli to lure investment back into the UK and thereby kickstart the post-pandemic economic recovery, business leaders know all too well the permanent changes to their industries as a result of Covid-19.

Though undoubtedly challenging, many businesses have successfully adopted new policies and processes as a result of Covid-19 that have, in fact, improved their service or product. Yet in the world of commercial property, the task of adapting to the “new normal” is a far broader one.

At the height of lockdown, many construction projects were placed on hold or cancelled, and numerous construction firms struggled with everything from issues obtaining proper building materials to significant cashflow problems.

Now that the UK’s post-pandemic economic recovery has begun in earnest, the government has realised that it must encourage activity to aid the construction industry and provide the investor confidence needed to fund new property developments. Indeed, Prime Minister Boris Johnson recently announced a £5 billion investment in infrastructure and new-build developments across the nation.

However, beyond the need to get Britain building once again, there have also been changes in organisations’ demands when it comes to commercial real estate. Property developers and property development finance firms, which supply vital investment into the projects, must be alert to these trends.

Shifting preferences

Accumulate Capital recently commissioned a survey of over 500 senior decision-makers at UK businesses to measure how the Covid-19 pandemic has affected their preferences regarding commercial property. Almost three quarters (73%) of responded said that they believed Covid-19 would lead to companies downsizing their office space in the coming year – with just under two-fifths (37%) actively planning to soon relocate to a smaller commercial space themselves.

Extrapolating from these figures, the demand for smaller, more agile commercial property spaces will likely rise in the coming months. When coupled with the numerous social distancing requirements enforced by government until the virus is contained, we may see a whole new type of pseudo-co-working space become increasingly popular in 2021.

The same can be seen in the residential sector, with homebuyers also demonstrating different priorities than they did just one year ago. A new survey by estate agency Savills asked prospective homebuyers if their preferences towards new homes had changed since lockdown – with the answer being an emphatic “yes”.

Two fifths (39%) of buyers were now more inclined to seek out larger properties and 17% had expanded their acceptable property search area; meanwhile, 71% of under-40s said gardens and outdoor space had become more important. The inclusion of a separate workspace (44%) and wireless internet (48%) also rose in importance.

So, through working closely with developers, property development finance firms must pay close attention to how the demands of businesses and consumers are changing. The way development projects are presented to investors and prospective buyers can then be tailored to said demands.

Ultimately, companies must be able to demonstrate that they are catering to the needs of the buyers and tenants of the “new normal”, not merely replicating what worked before the era of Covid-19.

Assisting the post-pandemic recovery

With such grand ambitions for infrastructure and new-build development levels announced by the government, properly playing a part in the UK’s real estate resurgence is no small task. Those involved in property development financing must act decisively, quickly, and with proper foresight if they wish to play an integral role in the post-pandemic property recovery.

Property investors and real estate firms should prioritise modifying their strategies to be more in-line with the reality of a Covid-19 world. With so many new trends emerging in quick succession, being conscious of those that will stick around will prove invaluable when we witness the first development projects of the post-Covid era being completed.

Personally, I am optimistic that developers and their property development finance backers will make the right choices and successfully cater to the needs of the new normal. And, as development projects that were halted at the height of lockdown begin once again, it will be interesting to see what changes to projects’ original designs have been implemented as a result of the pandemic.

More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.