2022 – The Next Normal?

Over nine billion vaccine doses have been administered in almost 200 countries and yet still, we continue to navigate choppy waters. We have worked, learned, banked, shopped, eaten, exercised, taught and relaxed online for almost two years and yet people still talk about a return to normal.

While the world’s media outlets are suggesting we are entering the ‘pandemic endgame’, do we want to return to normal? A piece of graffiti in Hong Kong may have summed up in a few words what much of the world is thinking – ‘There can be no return to normal because normal was the problem in the first place.’


That may be true, but as we do get back to some semblance of what the world was like before March 2020 and as constraints are slowly eased, the beneficiaries of a more relaxed health framework, according to a comprehensive whitepaper by Costar called 2022 Global Predictions, will be the retail and commercial real estate sectors.

Here we’ll look at the predictions of senior thought leaders and industry experts as we move deeper in to 2022.

Prediction 1 – High-quality, sustainable offices will continue to outperform

We’ve alluded to this in past blogs but the demand dynamics for offices are changing. Businesses will take less space due to an increasingly permanent rise in WFH but it will be of a higher quality, recognising their commitments to Environment, Social and Governance, an issue that has risen to (or near to) the top of the property search agenda.

Prediction 2 – London’s vacancy rates will rise above the ‘Big Nine’

London’s vacancy rate has consistently trended well below that of the Big Nine regional cities (Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle-upon-Tyne) for the past decade but due to massive demand losses in the capital and a wave of new space – 2022 will see London’s biggest new supply for 19 years – the vacancy rate will rise above the Big Nine for the first time since 2005.

Prediction 3 – Large office sales will rebound but investors continue to be risk-averse

The overall appetite for large deals (£50m+) will return after the pandemic dramatically restricted activity from foreign investors as yields look far more attractive compared to cities like Paris and Munich and in comparison to government bonds. However, as we mentioned above, with the vacancy rate set to rise, investors will concentrate their efforts on prime newer, more sustainable properties that will hold their value over older, riskier assets.

Prediction 4 – Smaller projects will become more expensive

While large-scale projects by the biggest developers continue apace due to more established supply chains and more robust contracts, activity will slow at the smaller end of the market. October’s statistics from the Department for Business Energy and Industrial Strategy show prices up 24% for ‘all work’ with prices for some steel and timber products up by as much as 80%. Demand, logistics, Brexit and the knock-on effects of the pandemic will disproportionally affect smaller projects and developers.

Prediction 5 – Retail investment to pick up in 2022

There remains understandable caution around the retail sector, investors will take the view that occupational risks will be smaller than originally feared. Supermarkets and out-of-town retail parks remain very popular – and falling values in shopping centres will attract more buyers – and the availability of debt will also improve.

Prediction 6 – 2022 will be the breakout year for checkout-free shops

Amazon currently have nine checkout-free stores across London in high-value areas and Tesco and Morrisons are testing similar technologies. Undoubtedly Amazon will continue to open similar stores, as will other bricks-and-mortar retailers, based on the premise that a leaner shopping process, reduced staffing costs, increasingly efficient technology and almost no shoplifting contributes to greater profits.


What will 2022 bring?

As with all assets, best-in-class is limited so it’s reasonable to expect the core City and West End submarkets to be the strongest performers through 2022. ESG is at the forefront of demand from both corporate occupiers as well as smaller businesses and innovative start-ups and supply – especially of second-hand space – will reflect those aspirations. Where landlords are making the effort to improve their space, they will reap the benefits.

We look forward to 2022 with a renewed sense of optimism and as always, for all your central London property requirements, please contact us on 020 7629 1088 or email info@bdgsp.co.uk.