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Healthcare sector expected to drive commercial property market in 2022

Healthcare commercial property

The last two years have seen a complete shift in attitudes towards healthcare and the importance of promoting a work-life balance, leading to unforeseen trends across the sector. The UK commercial property sector is expected to benefit from the uptake in demand from this sector in 2022.

Regarding to the care sector specifically commercial agents are expected to see expanding care home operators delivering the likes of dementia and palliative services as well as potentially a rise in a new form of care home which specialises in long COVID health problems. Changes may come in the form of extensions to existing sites, new-builds, or the conversion or adaption of existing vacant properties such as offices, pubs or hotels.

An increase in the need for commercial units may also come from other areas of the care sector, such as the wider network of PPE manufacturers and suppliers in addition to the tech companies and laboratory spaces in healthcare.

“This year we will see continued GDP recovery, but a disappointing Q1 with business uncertainty linked to pandemic and new uncertainties in UK/EU relations given the recent resignation of Lord Frost. Likewise, uncertainties will linger about the unpredictable global monetary policy responses to inflation. The risk of policy mis-steps is high. We expect UK CPI inflation to peak at around 6 per cent in Q1 2022, then fall dramatically in May/June spurring stronger investor sentiment. Inflation will be sub-3% by mid Q4 2022. Look for a strong investment surge in H2,” said Walter Boettcher, Head of Research & Economics at Colliers.

“Taking a look across the board, UK commercial property pricing will remain stable with further yield compression expected in prime long income market segments including London, regional offices and UK wide logistics. Retail yields will stabilise further with the exception of obsolete shopping centres.”

The underutilisation of office space will remain a feature of the market this year as occupiers continue to assess future requirements, and occupancy levels will also depend on the trajectory of future Covid variants. Colliers predicts that an office occupancy rate of 75 per cent looks likely to be the norm for 2022. Despite uncertainty, pricing on the best quality refurbs, premium and trophy stock will see healthy uplifts. Further yield compression is likely for prime assets. Occupier appetite will drive headline rental growth and generate keen competition between domestic and cross-border investors, especially as travel restrictions are eased for long-haul travellers.

Take-up of large distribution warehouses of 100,000 sq ft+ will exceed 40 million sq ft in an undersupplied market in 2022 states Colliers. Demand for new warehouses will remain elevated, driven by the provision of new space for e-commerce, but also for global occupiers working to decrease their carbon footprints. Rents will continue to rise strongly, pushed by a landlord-favourable supply/demand imbalance, increasing land values and inflationary pressures on construction costs.

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