Usually, CoreNet’s annual January event, UK’s Predictions and Resolutions, is a great barometer for the year ahead, as a panel from across the corporate real estate industry discuss what the next 12 months might bring. This week’s event was a little different.
The usual certainty about specific changes, from structural challenges to movements in lease lengths, was missing. There was no mention of WeWork, the on-balance sheet reporting of leases through IFRS16, and hardly a word about millennials, AI, IOT and intelligent sensors.
Last year, the focus was all on how the suppliers to the real estate sector – landlords, developers and investors – would finally realise that they don’t understand their customer. This year, the focus was on Brexit – perhaps unsurprisingly just two days after the House of Commons vote on Theresa May’s Brexit plan, and a day after she survived a no-confidence vote.
“A year ago, I thought 2018 was going to be an uncertain year,” said Steve Norris, partner at Incendium Consulting, who chaired the event held at Turner & Townsend’s London office. “Now 2019 is proving to be more uncertain than anyone could have ever imagined.”
That sense of uncertainty permeated the event. “Corporate decisions on real estate and other areas will be postponed until the summer,” predicted Liz Troni, head of EMEA research and insight at Cushman & Wakefield. The markets might see a bounce in the summer as a result, she added. Brexit-related corporate relocations would be in their hundreds rather than thousands she added. “It’s not going to be the 50,000 jobs disappearing, as some predicted; we’re currently at about 600 job losses as a result of Brexit. So, Brexit will actually have little impact on the real estate sector.” A bold assertion in a room full of nervous CRE professionals on both sides of the occupier / provider divide. In fact, for Troni, it was the retail market – besieged by high business rates and the move to online – which would face the biggest challenges this year.
Short-termism and uncertainty were also themes for Thomas Erseus, head of global real estate at Ericsson. The Swedish tech giant’s portfolio fluctuates and changes frequently in response to business demand, he said. “We just don’t know what space we’ll need in three years’ time.” He acknowledged that there was a tension between the more short-term business strategy and the longer-term view of the CRE world.
But he did predict that 5G, which targets a high data rate, reduced latency, energy saving, cost reduction, higher system capacity, and massive device connectivity, will see a breakthrough in 2019 and be a gamechanger for business and the wider CRE community.
Perhaps the most thought-provoking – and uncertain – panellist of the morning was Paul Hardy, Brexit director at DLA Piper. He explored the various options for Brexit over the coming months and concluded that the chance of No Deal was 30%, and a deal of one sort or another (a Customs Union or Norway+) was 40%. While he felt a
second referendum should be a last-ditch move because it was unpredictable, needs new legislation which could take time to implement and was highly likely to unleash civil unrest, he predicted that there was still a 30% chance that it could happen.
“This is without doubt the most uncertain and dangerous political environment the UK has been in for decades,” Hardy concluded. Sobering times.
A longer version of this article can be found at www.i-fm.net
By Cathy Hayward