Trend Analysis - 13 July 2018

Industry Insights: the changing retail landscape for the UK real estate and real estate funds sector

Jon Taylor and Daniel Hainsworth attended the 3rd Annual Real Estate and Real Estate Funds conference in Jersey last month.The conference delivered key insights from ten industry experts, including our own Corporate Director, Daniel Hainsworth, within the Jersey and UK real estate and real estate funds sector. Jon Taylor sums-up the major outcomes:

Author of article:

Jon Taylor

Associate Director, Funds

Technology

Every sector will be influenced by continuous improvements in AI and technology, and it was interesting to hear how technology is impacting the commercial real estate sector.

As e-commerce develops and people turn to shopping online, there is increased demand for industrial property to store produce/products in the absence of a physical retail space, thus resulting in the industrial sector growing by 4% by April 2018 (annualised) in a sector that doesn’t usually see much growth. For this reason the preferred sector for investment is industrial and logistics – according to CBRE EMEA Investor Intentions Survey 2018.

Whilst the retail sector fights back, it has not been uncommon to see retailers increase their online presence but research by CRBE shows that shoppers remain inclined toward the physical retail experience, particularly when technology is part of the high street experience. For example, the recent opening of Amazon’s second ‘Amazon Go’ cashierless store in Seattle shows that traditional online retailers are starting to recognise the importance of a more tangible experience. While Amazon dominates online retail - in December over 26% of online traffic in the UK retail category was to Amazon, according to Hitwise - the reality is that a significant proportion of purchases still happen offline. This transformation in how we consume products on our highstreets and online will undoubtedly impact the Real Estate and Real Estate Funds sector.

Going forward, how ‘we’ use commercial spaces and offices is changing and so are the buildings. Co-working is on the rise, whereby the tenants do not lease the buildings but parts of it and on a flexible basis in order to create a flexible way of working. In addition, intelligent buildings are being designed and engineered to have technology built in. These are measured on anything from building products and applications to smart building management, reducing engineering costs by maximising utilisation, space planning efficiency, increased use of building data and sensors to command lighting.

Technology was also noted to be a disruptor in driving change, particularly when compared to politics.

Taxation

With the UK Government’s proposed tax changes, it was considered how this might impact Real Estate investors. There has already been significant changes to UK tax in the last 3 years, which have impacted on the Real Estate sector. It was considered whether the proposed changes being, re-based of commercial property for calculation of future gains and transition of Non-Resident Landlords Scheme into Corporation Tax would dampen investment appetite into the UK commercial real estate market.

In short, it is yet to be seen what the impact of technological developments and proposed tax changes will be, what is clear is that the sector will need to remain adaptable and be ready for inevitable changes, to ensure it remains an attractive alternative sector. The UK Government has stated its aims and Jersey representatives have consulted with them on their proposed changes.

If you would like to discuss with Jon any of the latest fund industry insights and how Hawksford can support you and your business, please contact him.


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