2016 was undoubtedly a year of change, economically and politically.
It was a year in which DealMakerz suggested a Trump victory and a veteran recruiter suggested London estate agents needed a ‘reality check’ on their high salary expectations.
Here we give our top 5 predictions, in no particular order, of what we expect happen to the London property industry in 2017.
1. Big businesses will continue to choose London
Post-Brexit London received a number of business boosts, with Apple and Google confirming huge office locations in the Capital. Combined, these two decisions alone created tens of thousands of jobs and billions of inward investment, however its the broader trends within rapidly growing areas such as FinTech that should give commercial property DMZ‘ers optimism.
Already the global FinTech capital, the impact of London’s technology hub status will ripple through the economy at an overwhelming speed in 2017. Japanese-based SoftBank announced they would be taking space in Mayfair for a new $100Billion FinTech fund, Facebook announced they would be adding a further 500 employees in their new London HQ and shared workspace giant WeWork announced multiple new locations in the Capital – all post-Brexit deals.
Combine this with the governments aim of lowering UK corporation tax to an extremely competitive 17%, DMZ predicts a flurry of big businesses will continue to choose London in 2017.
2. PropTech to close in on property supply chains
PropTech. Most of us have heard the phrase banded around but many are still waiting for the sector to really take off, here at DMZ we think PropTech has already irreversibly changed the face of Real Estate.
Zoopla, Rightmove and an array of online agents have shaken the property supply chain and that’s only the beginning. 2017 will see technology penetrate all areas of real estate; firms like LendInvest can provide online property lending and investing platforms to institutions as well as individuals, online mortgage broker Trussle has partnered with Zoopla and is set to blow open the mortgage advisory market and hybrid estate agent Purplebricks recently surpassed established giant Countrywide with a market cap of £396m.
Every area of property is likely to affected – tenants can use FixFlo to upload photos of their broken toilet and send directly to their landlord, split tricky household bills using the Splittable app and set off to work in their shared workspace at WeWork or Warner Yard. All whilst checking the latest news on DealMakerz, of course.
3. The rise & rise of online and hybrid estate agents
A multitude of online or hybrid estate agents have sprung up over the past few years. Initially overlooked by the major agencies, the rapid rise and sheer volume of online agencies have made them a force to be reckoned with. Traditional firms like Countrywide have noticed and recently adjusted their sales model to include an online option, whereas others have opted to invest or acquire like Savills equity investment in YOPA.
The current Godfather of online is Purplebricks who boast a dominant 65% share of the online market, offering sales and lettings options. Critics point to the online model only penetrating approximately 5-7% of the market, however this is still a hefty increase on the 2.5% reported in 2014. Add to this the recent government announcement to ban lettings agent fees “as soon as possible”, we predict a further pivot to online/hybrid offerings from all major agencies, especially in larger cities like London.
4. Explosion of WeWork style office repurposing
AirBnb have led the way in residential subletting (often with some unintended consequences) and $16Billion shared workplace company WeWork made inroads in 2016 with numerous London acquisitions. Now other companies are getting in on the act – Barclays, Deutsche Bank and Credit Suisse sublet an eye-watering 1 million sqr ft of office space between them last year. It’s not only big Banks, Microsoft also sublet 90,000 sqr ft of office space previously occupied by their Skype business.
This isn’t a London-centric trend as The New York Times newspaper announced they would be subletting at least 8 floors of its Manhattan HQ to provide an additional source of revenue.
2017 will see a ramp up of this trend, which will put pressure on developers to incorporate a potential secondary use for office space if business isn’t going well for tenants. Ditching any grandiose marble fittings and pivoting to a colourful style that could suit tech companies, or ones who want to act like like they’re in tech, is a must for London developers in 2017.
5. London residential exodus to surrounding cities
We’ve all heard it before, “this area is the new (insert nearby more gentrified area here)”.
However, London’s pricey residential market is now pushing swathes of first-time buyers outside of what would historically be deemed ‘London’ towards more modern towns. This increased demand in places like Luton, Milton Keynes, Basildon and Slough has resulted in a mini price spike; Luton house prices increased by nearly 20%, Basildon 17% and Slough 16% – all within the past 12 months.
The affordability of these areas versus London is staggering; a 4-bedroom, 1,300 sqr ft end of terrace house costs around £300,000 in Luton with similar money buying you a studio flat above a shop on Battersea High Street.
DMZ don’t see a major correction in London house prices in 2017, which means the exodus to towns like Luton will continue at speed this year. Any DMZ‘er residential developers could do worse than consider a multi-unit project in relatively untapped towns on the wider commuter belt like Hitchin or Crawley. Apparently Hitchin is the new Luton…
Lastly, DMZ would like to thank our thousands of readers in 2016. We look forward to what 2017 will bring!
Want to know the story behind Britain's latest property mogul? Why a company is going bust? Our coverage goes beyond run-of-the-mill news on key real estate issues.
Our subscribers are made up of the most influential Founders and CEO's in UK property. Gain a competitive edge and get informed - read what they read.
Understand exactly what the most senior figures in UK property are thinking. Exclusive opinion articles from powerful real estate influencers that move markets.