Press Releases

• Survey of over 100 industry leaders shows almost over three quarters (77%) are confident that the real estate sector will perform strongly over the next five years, despite current economic pressures
• Almost half (49%) plan to accelerate delivery of net zero commitments in 2023 with just 2% planning to scale back
• Alternative asset classes such as life sciences, student accommodation and Build-to-Rent expected to show the best financial performance this year

Over three quarters of UK property companies are confident that the real estate sector will perform well over the next five years despite current economic pressures, with almost half (49%) planning to increase investment into carbon reduction this year, according to a new industry survey by the British Property Federation. 

The survey of BPF members, which was conducted by Ipsos in partnership with Grosvenor, polled 105 Board-level executives of UK property developers, owners, funders, agents and advisers, from 15 December 2022 to 10 January 2023.

The results show that the property sector expects 2023 to be a challenging year, with only 10% positive on the short-term outlook for the UK economy. Over half identify economic uncertainty (57%) and inflation and the increase in build costs (56%) as one of the biggest strategic risks for 2023, while 41% highlight the cost of debt and just over a fifth (21%) cite the current planning system.

The industry is more positive on the longer-term outlook, with 77% confident in the performance of UK real estate over the next five-year cycle. Over this period, the industry’s ‘skills gap’ (identified by 29%) and climate change (28%), were identified as key strategic risks, behind economic and political uncertainty.

Economic uncertainty will not deter investment into decarbonisation

Despite a challenging outlook for 2023, almost half of leaders surveyed (49%) plan to accelerate the delivery of their net-zero programmes over the next twelve months, with a further 28% expecting to maintain investment at its current level. Just 2% expect to scale back delivery.

However, the survey responses suggest that access to talent could be one obstacle to achieving net zero. Overall, 77% are finding it difficult to attract and retain talent, with environmental sustainability identified most frequently (by 26%) as an area where it is difficult to recruit people with the requisite specialist skills.

Property sector ready to seize ‘levelling up’ opportunity

While London remains the pre-eminent property investment destination for leaders, with 40% expecting to increase development in the capital over the coming year, the Midlands, and other key regions, are also likely to receive increases in investment. Positive views around the construction of the High Speed Two rail line in cities like Birmingham, may account for the 28% expected increase in development in the Midlands. The North of England and Yorkshire are also expected to get a 19% uplift.

Nearly six in ten (57%) said that an improved economic outlook would make them more likely to increase development activity in 2023, while almost half (49%) highlighted that a reduction in inflation would have the same impact. Other common catalysts for development activity included increased availability or cost of debt (34%), greater certainty of demand (27%), and a more efficient planning regime (22%). 

Emerging real estate asset classes expected to outperform

The survey results suggest a split between emerging ‘alternative’ sectors and ‘traditional’ real estate asset class performance over the next twelve months.

When asked to identify which (up to three) asset classes would outperform in 2023, almost half (47%) identified life sciences, 42% selected student accommodation, with 41% opting for Build-to-Rent. Despite recent volatility in pricing, 28% selected logistics to outperform in 2023 with the sector supported by record low vacancy levels and strong underlying demand.

By contrast, respondents were less confident in the short-term performance of traditional workspace: 10% expected co-working and flexible office space to perform well, 8% said the same for London offices and just 2% were positive about regional offices. Other sectors that were not tipped to perform well by many include hotels (7%), town/city centre retail (5%) as well as out-of-town (4%), with residential for sale and leisure both on just 3%.

The shift toward emerging asset classes is also reflected in property companies’ top three longer-term investment plans. Over the next five years, 41% of respondents plan to increase investment into Build-to-Rent, 31% are targeting logistics and 30% are planning to upscale in life sciences.  

Melanie Leech, Chief Executive, British Property Federation, said:

“While we are braced for 2023 to be a challenging year, those surveyed clearly believe that there is a positive outlook for the sector next five years, reflecting the cyclical nature of real estate and the property sector’s role as long-term investors in towns and cities.

“The sector is currently facing a perfect storm of pressures including cost inflation, skills shortages, and increased cost of debt but as economic conditions improve we should see activity rebound strongly.  Crucially, the industry is set to double down on its carbon commitments which is vital if the UK is to achieve its net zero target.

“Political and economic uncertainty however remain the two most significant risks for survey respondents over the medium term and the Government must not take the ingenuity and commitment of the property sector for granted. After the political and economic turmoil  of 2022 we need a clear and coherent plan for taming inflation, unlocking private sector capital for regeneration and modernising and resourcing the planning system to allow the public and private sectors to partner together to accelerate the delivery of the housing, workspaces and local infrastructure that will drive growth.”

James Raynor, CEO, Grosvenor Property UK, said:

“2023 is set to be a tough year, but the property industry is inherently long term in its outlook with projects taking many years, and sometimes many economic cycles, to deliver.

“The survey results underscore this resilience with a continued emphasis on delivering the infrastructure the UK needs and the opportunity – economic, employment and societal - we help create. But to maximise our contribution we need a fit for purpose planning framework and a clear plan from the Government to reduce economic volatility. 

“We shouldn’t be surprised that net zero is high on the agenda; addressing our carbon footprint isn’t just the right thing to do, the commercial and reputational case is increasingly clear. We’re already well on our way having reduced emissions by over 24% in the last two years. And with our pipeline of sustainable projects attracting premium rents, including our first net zero offices which will complete pre let soon, our early moves to do the right thing are supporting the business as the economy softens.”

Read the topline result here.

Notes to editors

About the British Property Federation

The British Property Federation is the membership organisation for, and the voice of, the UK real estate industry.

We represent and promote the interests of all those with a stake in real estate in the UK – owners, developers, funders (equity and debt), agents and advisers.

We work with government and regulatory bodies to help the real estate industry grow and thrive, to the benefit of our members and the economy as a whole. Because our membership is industry wide, we can provide government and regulators with the knowledge they need to make decisions.

Technical note

Ipsos interviewed 105 members of the British Property Federation using an online survey. In total, 105 BPF members based in the United Kingdom, who chose to take part in the survey, participated between 15 December 2022 and 10 January 2023.

The BPF invited members to the survey, with Ipsos carrying out fieldwork online and producing the data tabulations. All analysis, interpretation and reporting of the survey results was carried out by the BPF and Grosvenor, with Ipsos reviewing the findings.

The sample for this survey is purposive, reflecting the views of those who chose to participate rather than a representative sample of BPF membership. As a result, data is unweighted and the results can be taken as indicative of wider membership views only.