The Prospects for the UK Commercial Property Marketplace in 2022

The current climate shows that nothing is predictable, it seems. Despite that, the broader outlook indicates that real estate investments and leasing volumes will improve in 2022, and the current inflation risks will subside. The country's housing market has remained resilient the past year for homeowners and commercial property investors alike. 

If you consider buying or selling commercial property this year, read on to discover this year's predictions. 

A Brief Overview of Recent Years

Before making any predictions about the commercial property sector in 2022, we must look at the key trends of 2020 and 2021.

2020 proved to be challenging for the market as COVID-19 spread rapidly worldwide. There was a widening disparity between the industrial sector and office and retail markets. The real estate sector struggled significantly against the economic pressure the pandemic caused. However, the industrial sector boomed, sustained by favourable structural dynamics. 

The key takeaways of 2020 are: 

- retail and office availability rose at rapid paces

- industrial properties outperformed other sectors as occupier and investor demands strengthened

- the outlook for capital values and rents were divergent

- the COVID-19 pandemic pressured the country's economy, causing mass struggle across retail and office real estate

With 2020 proving to be a bleak year for the commercial property market, many feared how 2021 would turn out. Yet many hoped that the year would turn into a new beginning. 

Much of the year felt the same, as COVID-19 remained in the spotlight, and we felt the continued effects of Brexit in the background. However, the underlying sentiment of a new beginning was true. 

The key takeaways of 2021 were: 

- a strong recovery for the UK market following the pandemic slump

- the most substantial capital growth since 2010

- a consumer-driven economy

How Does 2022 look? 

The new beginnings of 2021 promised to continue to rise in 2022. The UK economy is growing, and the labour market is strengthening, providing a positive outlook for real estate in 2022. 

As such, the prediction for the UK commercial property market is simply growth. 

The Economy

The economy will move to a normal road in 2022, following the recovery phase of 2021. However, the UK will enter a more challenging economic period as the economy transitions into average recovery. We'll continue seeing rising inflation, a tight labour market, and staff shortages. Yet, expert predictions continue to be optimistic:

- The inflation will be temporary, as it is driven by supply shortages and rising energy prices. These should diminish by the second half of 2022. 

- Consumers have reserved substantial savings during the pandemic. They are likely to spend a large portion during 2022. Household spending will contribute to the recovery economy. 

- Business investment will increase.

The main risks to the recovery phase are rising COVID-19 cases and variants, supply bottlenecks and rising energy prices. 

Offices

The oncoming year will show a return to regular leasing activity after the historic lows seen through the pandemic. Additionally, the return of leasing activities will bring focus to higher-quality buildings. 

For now, expect hybrid work environments to stay as companies test new strategies. 

Industrial Properties

The UK industrial sector will remain strong, as rental growth will likely continue throughout all regions in 2022. However, the market will have its own challenges, including planning, staff shortages, and rising construction costs. 

Sustainability and carbon reduction are critical components for the industrial market.

Retail

Retail will continue to recover through 2022. As consumer spending returns to normal, we can expect improved retail and leisure spending rates. However, future COVID-19 outbreaks, price inflation, and global supply chain issues continue to risk the retail market.