When we wrote this section of our cross sector overview last year, we opened with a quote from Lex Luthor to the effect that the need for land and property would prevail despite natural disasters and human conflict. That was approximately three weeks before the World Health Organisation first reported a cluster of pneumonia cases in the city of Wuhan. Little did we know how apt that reference would be in 2020, as the uncertainties of Brexit paled into insignificance compared with the disruption caused by Covid-19. 

The extent to which the pandemic changes the way we use, appraise and value property long term remains open to debate. However, it seems certain to influence the strength of both occupational and investor demand for different asset classes in the short to medium term. 

It has accelerated structural change in the retail sector, rebalanced the amount of time we expect to spend working at home versus the office and provided more time to reflect on the importance of the ESG credentials of our property assets. So, over the next five years we expect need and social impact to be at the heart of property investment. 

The need for timber and environmental credentials of investment in forestry puts it at the top of our list of expected returns. However, the limited size of the market and the very longterm nature of the investment suggests that the prospect of money growing on trees will only be enjoyed by a select handful of investors.

From the need perspective, we expect beds and increasingly sophisticated sheds to deliver some of the strongest interest in this period, as yesterday’s alternatives rapidly become tomorrow’s mainstream. During this period of transition, development will remain key to buying in these sectors. Meanwhile, demand for this group of assets looks set to be underpinned by the security of their income streams and the potential for further yield compression, in a period when the cost of money is expected to remain low. 

Other sectors are set for a period of reinvention, whether that be the retail and leisure offering on our high streets or the way we use our office stock. In both cases, demand will remain for those assets which are best in class and can adapt to our changing lifestyle priorities. That suggests a widening gap in the performance between prime, secondary and tertiary assets and an increase in redevelopment opportunities. It comes when the Government retains ambitious housebuilding targets and will welcome repurposing proposals that play to its levelling-up agenda.