28th January 2021
With the vaccination roll out gaining momentum, we afford ourselves a glimmer of hope that the end is in sight. Martin’s Properties Managing Director, Richard Bourne, reflects on the last 12 months and how the impact and repercussions of the pandemic will shape 2021 and beyond.
Whilst it has been a turbulent 12 months across the world, the pandemic has provided time for reflection and given people an opportunity to review their work and lifestyle balance. At the start of the pandemic many questioned the future of the office, nearly a year on I think this question has subsided as people now place greater importance on human contact and social interaction. Alongside the need for teams to be together for collaboration, the office also plays a huge role in attracting, training and retaining talent. Looking at our portfolio we continue to see offices in the best and most accessible locations with local amenities as an attractive investment. We also expect to see a reduction in occupational density as more space is attributed to teamworking and informal areas to improve the quality of the working environment.
Our high streets are an area of the economy that has been more heavily impacted, due to the enforced closures. The pandemic has widened the gap between certain locations, pitches and those businesses which have moved to onmi-channel sales. It has shown that retail and F&B units located in strong residential catchments will continue to generate footfall and trade relatively well. Many of our retail and F&B customers adapted swiftly to the challenges presented to them and importantly stayed in touch with their consumers. Business rate relief, furlough and business loans have all helped our customers to continue during this very difficult period but we have also been assisting them to varying degrees according to individual circumstances. For example, we have agreed conditional deferred rental payments in return for lease extensions, new leases or variations to lease terms. This includes an agreement to write off an element of the deferred rent in 12 months time, subject to meeting all other obligations under the terms of the lease during that period. Engaging in open dialogue with our customers and working together to find bespoke solutions has been one of the positives that has come out of this. There is no doubt that a more flexible lease model for landlords and tenants will be a lasting legacy of this period. Alongside lease models that work for all, forward-thinking landlords and retailers will increasingly look to work together and focus on footfall drivers, with experience at the heart of the high street. A loyal, affluent local customer base is crucial, as is the overall experience and retail mix on offer. This is something that we have seen on the Kings Road where footfall has remained relatively strong during lock down and when the shops did reopen the average transaction size and conversion rate has increased.
The roll out of same day delivery has also rapidly accelerated over the last 12 months and is something that many consumers now expect. This, alongside Brexit and the need to manufacture, source and produce materials locally is an area for growth for industrial units and we expect to see a rise in demand for accessible national and local distribution centres.
I am constantly surprised by the Prime Central London residential market, which continues to prove its resilience. The pandemic like many challenges before it: tax hikes, Brexit and stamp duty rises, has failed to put an end to London’s enduring appeal as one of the best places to live in the world. In part this has been thanks to the Chancellor’s stamp duty holiday, but despite the deadline for this looming we expect interest levels and transactions to remain relatively strong as lockdown eases and people reassess their priorities and where they want to live. One change we have seen, and expect to continue, is the demand for the larger apartments and houses with good communal or outdoor space and a layout that facilitates the changing needs of occupiers. Whilst Brexit may provide a further challenge to residential demand as some workers shift to other EU countries, the fundamentals of living in London remain. It is home to some of the best healthcare, education and legal structures in the world, not to mention its 3,000 green parks, history and world class shopping which continue to attract overseas investors, many of whom will find favourable exchange rates. These ingredients will also ensure the return of the hotel sector one that has been most harshly hit.
Despite the challenges of the last 12 months, we have worked hard to ensure we retain our team, to not furlough anyone and to ensure we provide continued 5 star service to our customers. We have taken the time to reposition ourselves, boost our firepower and deploy further capital in the market for the right opportunities at the right time that will generate income and capital growth, thus maintaining our overall strategic objectives.
Looking ahead to Q2 2021 and at the opportunities that will arise, we see some real value in acquiring this year. We will be seeking a joint venture partner to invest funds alongside us as we grow the business activities, utilising our breadth of knowledge and experience.
In terms of investments, we remain active and are actively looking to acquire the following:
- Prime, well located retail and retail warehouse units
- Industrial development
- Senior living, both in terms of an operational business model and property investment
- Well located office buildings in fringe London locations and major towns and cities