Will 2022 will be the year of reforming relationships in real estate?
By Ben Monteith
It’s always nice when the year kicks off as it is likely to, and should, go on.
So, thanks go to Peter Pereira Gray who has kindly introduced one of the themes that will be popping up in property media and conversations over the course of the year.
Pereira Gray, the managing partner and chief executive of the investment division of global charitable titan Wellcome Trust, has written an independent review on behalf of the Royal Institution of Chartered Surveyors (RICS). The report’s recommendations broadly focus on the relationship between property valuers and their often next-desk neighbours, the advisory wings of property consultancies.
While the industry digests the report, the recommendations of which RICS has accepted in full, it is much more indicative of one thing that is likely to receive attention among property professionals this year: namely, that of the relationships between us.
Anyone who works in property will tell you it’s a relationship business. They’ll cite the number of introductions, or even deals, that are thrashed out over long lunches and evening drinks, or even just through bumping into each other in the narrow geographical area of central London in which many agents and developers have their offices.
Strong relationships are, not unreasonably, considered a strong selling-point for the property industry. And, while all is not sunshine and rosé, there are real opportunities for the property industry to emerge from the pandemic with stronger relationships still. 2022 may well end up being the year in which the property industry resets how it works together with stakeholders to deliver tangible benefits to its customers.
How those in the property industry engage with their internal and external stakeholders has been growing in importance over the past two years. Firstly, because of the rise of ESG. While the G(overnance) rarely attracts the same attention as its siblings, as the bookish uncool triplet, it is particularly of importance to the property industry due to its sometimes centuries-old power dynamics and established nature.
The second reason is because of the pandemic. In all walks of life, personal and business relationships have been tested by the impacts of the pandemic. And the past two years have seen relationships stretched to breaking point. The rise of company voluntary arrangements (CVAs) in retail property in particular has caused some bitterness among property owners and investors.
But the past two years have been notable for increased collaboration between many landlords and tenants. Many landlords – particularly the institutional property players who can afford a bit more leeway – have actively worked with their tenants to support them in challenging economic circumstances. This is true in both residential and commercial property, although it’s been particularly encouraging to see the world of commercial property better work together – recognising that property is becoming more of a service than a commodity.
This plays out through rent holidays (or forgiveness) or more indirect answers. In retail, turnover-based rents are increasingly seen as one part of the solution. In offices, major new developments are coming kitted out with technology built-in or flexible working spaces. Mixed-use schemes benefit from destination marketing that encourages customers to visit to shop, eat and drink – including the office workers who want more from the physical environment around their workplace.
In these scenarios, and others like them, there’s a recognition that landlord and tenant benefit from shared (positive) outcomes.
Property, like much of the economy, has been increasingly focusing on environmental issues in recent years. Further attention is being drawn to social issues, with diversity in the sector an obvious problem.
2022 seems like it’ll be the year when the under-appreciated, much less jazzy G of ESG becomes a bigger part of the conversation.