Alicia Renshaw, senior associate in Leonard Curtis Legal’s real estate division
The commercial real estate landscape in the UK is ever-evolving, shaped by economic shifts, technological advancements, and changing societal preferences.
After the first four months of 2024, we’re beginning to get a clearer picture of what the rest of the year might have in store.
Sustainability, flexibility, and diversification are all key elements being taken into account for property purchases in a volatile market.
Here, we take a closer look at some more of the prevailing trends that are reshaping the commercial real estate market this year.
Flexible workspaces and hybrid models
The adoption of flexible work arrangements continues to influence the commercial real estate sector. Companies are increasingly embracing hybrid models that incorporate both remote work and office-based collaboration. This shift has fuelled demand for flexible workspaces, co-working solutions, and adaptable office layouts – therefore there is likely to be demand for quality buildings and offices in prime locations.
Sustainability takes centre stage
Sustainability is no longer a mere buzzword but a driving force in commercial real estate. In 2024, the transition towards net zero is likely to gain momentum with tenants and investors placing greater importance on environmentally friendly and energy-efficient properties.
Developers and landlords are responding by integrating green building practices, from energy-efficient lighting to eco-friendly construction materials, as well as introducing other sustainability features to attract tenants.
A prime example of this is Eden in Manchester which is a new 12-storey office specifically designed to meet sustainability and net zero carbon targets (need to get hold of the Eden pic).
Rise of e-commerce and logistics
The surge in e-commerce has continued to stimulate demand for logistics and distribution centres. Logistics facilities, strategically located near urban centres, are in high demand to facilitate quick and efficient delivery. Investors are keen on opportunities in the logistics and industrial real estate sector to capitalise on the growing online retail market and discount retailer businesses.
Adaptive reuse and repurposing
Adaptive reuse is gaining momentum as a sustainable and cost-effective strategy. Developers are repurposing existing commercial properties for mixed-use developments, transforming old warehouses into vibrant office spaces or retail hubs. This trend reflects a commitment to maximising the utility of existing structures and minimising environmental impact.
Wellness office spaces
The focus on employee well-being is now influencing office design. Commercial spaces are incorporating wellness and social features such as green spaces, natural light, fitness facilities, communal hubs and break-out spaces. Companies recognise that a healthy and comfortable work environment contributes to employee satisfaction and productivity.
Diversification in retail spaces
The retail sector is witnessing a shift and retailers will likely be cautious in 2024 and we may see vacancy rates continue to rise for high street retail units. Some retailers are diversifying their offerings, incorporating entertainment, dining, and unique experiences to attract consumers so we can expect some of the larger retail spaces, i.e. retail parks, becoming more attractive to retailers. The emphasis is on creating destinations rather than traditional shopping outlets.
Looking ahead
As we navigate the ever-changing commercial real estate market this year, these trends underscore the industry’s responsiveness to emerging challenges and opportunities.
Stakeholders who embrace these shifts and stay tuned in to the evolving needs of tenants and consumers will be well-positioned to thrive in a dynamic and innovative new world.