The impact of the recent pandemic lockdown continues to be felt in the UK commercial real estate sector as property owners adjust to new demands stemming from a surge in online shopping and shifts in the remote working culture, according to Bank of London & The Middle East (BLME).
Rashid Khan-Gandapur, the real estate finance director at BLME, told IFN Investor that the bank’s pool of GCC investors – who view UK real estate as attractive Shariah compliant assets – have embraced enhancement of “what we call secondary commercial property”.
These are existing office and retail properties, which tend to have large floor plates to provide wide open spaces that work well for both work environments and merchandise displays.
For offices, the trend now is to cut the available space into smaller segments by building new partition walls and optimizing shared facilities. “You are increasing the quality and connectivity, for example in terms of the air conditioning.”
In a case where the large office space is split for 10 tenants, who may want showers and storage as they would cycle to work, “there may be a communal cafe on the ground floor and shared kitchen facilities. Rather than have their own or pay for 10 separate bike storages and so on, they share that amenity.”
Rashid said such enhancements are paying off. “When their leases expire, tenants are moving to smaller floor plates. But they’re spending more per square foot because they’re taking higher quality space.”
BLME noted a similar trend in retail spaces as vendors and shop owners optimized offerings in both the physical and online spaces in reaching out to customers. “That is what we call active asset management, which I think is one of the biggest changes seen when you go back five or ten years for Gulf investors.”
Within London itself, Rashid said it’s astonishing how resilient the UK capital city is after Brexit. “It constantly reinvents itself and it’s still a major financial center. It still attracts a lot of foreign investment.”
As such, investment interest in this city’s office spaces remain high as more employers are shifting back to needing the physical presence of staff at work – and the consequent reduction in remote working days.
Pointing out how many workers stay at cheaper places further out of London, Rashid said: “It is quite interesting when you start looking at all the behavioural changes. Office locations very close to transport hubs are much more in demand because commute times have gotten longer. Once people arrive in London, they don’t then want to travel another 30 or 40 minutes on the underground.”
This has led to a boom in the office market round railway stations and transport hubs like King’s Cross, Marylebone and Victoria, Rashid added.
These property trends have been spotted by several high net-worth families from the GCC region, said Rashid. “As they have actively invested in the UK with five or six of their own projects, they are also launching services in the UK to cater for other Gulf investors.”
Note: Click here to read BLME observations on the UK residential property sector trends