Property development: what to look out for in 2021

The property development sector is undergoing the greatest period of change since the 2008 financial crisis. Property developers are experiencing a significant drop in business confidence, and over 70% are planning to repurpose existing assets. But at the same time, major new markets are opening up and investment is expected to top £60 billion by the end of 2021.

What should property businesses make of this unpredictable new world? If you are preparing your strategy for the coming 12 months, it is valuable to scan the horizon and explore some of the major trends facing the sector.

What is behind the extensive changes in property development?

The changes in the property development industry are widespread and are continuing to have far-reaching effects. The coronavirus pandemic is, of course, the key driver of change. Nonetheless, it is important to be aware of other triggers of change too:

  • COVID-19: The disease continues to cause major disruption, closing offices, retail and entertainment venues while driving shoppers online.
  • New legislation: Some, such as the Stamp Duty holiday, were triggered by the pandemic, but others were instigated earlier – including the New Homes Ombudsman and new planning legislation.
  • Brexit: The exact outcomes are uncertain, yet separating from the EU is likely to impact material and labour costs.
  • Macro changes: Be it an ageing population, climate change or international migration, macro shifts will also influence the decisions that companies make.

So, how will these larger events feed into the strategies of property businesses?

7 trends in property development for 2021

At PlanRadar, we work closely with a wide range of property developers to understand their specific needs. Here are seven of the most important trends in property development we’re seeing among our UK customers.

  1. Relative decline in specific sectors

By now, it’s well established that the pandemic is seriously challenging a handful of key sectors. Lockdowns and social distancing rules have dramatically impacted retail, entertainment venues, hospitality and commercial offices. In the aftermath of the disease, we can expect these sectors to remain depressed for at least 12 months.

That being said, initial predictions about the ‘death of the office’ and an end to high streets seem premature. Most office workers report that they wish to return to the office, at least some of the time. And while retail has undoubtedly been hit, there is also a growing interest in ‘shopping locally’ which suggests the high street has a future – just not as we knew it.

  1. A rise in conversions

A side effect of the relative decline in certain sectors is that we can expect a boom in conversion projects. It is likely that 2021 will bring a surplus of newly vacant shops, offices or pubs in sought-after locations. We can therefore expect a significant rise in conversions, turning these properties into desirable apartments or, perhaps, flexible office spaces where individuals and companies can rent desks by the day (think of the WeWork model).

  1. Certain sectors to see high growth

The pandemic has also supercharged certain sectors where property developers can expect plenty of growth. The boom in online shopping will result in ever-higher demand for warehouses, logistics control centres and distribution points. With more people working remotely, we can also expect high demand for data centres, so expect growth in IT infrastructure too.

  1. Government projects to encourage property development

The UK government has promised to “build back better” with investment in numerous infrastructure projects and support for housing developments. Hospital maintenance and construction, school building programs and investments in prisons, courts and other state facilities will be at the top of the agenda.

  1. Easier planning for housing developments but end to Stamp Duty holiday

The government’s proposed reform of the planning system is intended to give the green light to more home developments, making investment easier and ensuring plans are approved faster. This will certainly make life easier for firms working on housing developments.

The Stamp Duty holiday which began in July 2020 was a boon for first-time buyers. As a result of the break, they could avoid the tax on properties up to £500,000. That was a saving of up to £15,000, depending on the price of the property. The UK government intends to end the holiday in March. While the break led to a “mini-boom” in house sales in 2020, the ending of the policy could lead to fewer sales being completed. Uncertainty about the level of demand means that housebuilders could face additional challenges in 2021.

  1. New rules for new builds

The New Homes Ombudsman is expected to launch at some point this year. The authority will be responsible for assessing the quality of new-build homes and giving buyers greater recourse if problems emerge. The transition should be straightforward for quality developers and enable them to stand out from competitors. And tools like PlanRadar, which support snagging, inspections and handover will make it even easier to verify that homes meet the highest standards.

  1. Climate-friendly will go mainstream

According to a PwC survey, 80% of property developers see energy efficiency and climate adaptation as an important factor in their portfolios. As the world transitions away from fossil fuels, a major trend in the property industry will be towards making construction as low-impact as possible. That could include the installation of solar panels on buildings, the use of more climate-friendly building materials or the enforcement of higher environmental standards.

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Prepare for change

The changes in the property development sector represent both a threat and an opportunity. It’s important to review established strategies, and you might need to shift your investments. Nevertheless, the seven trends outlined above also represent exciting opportunities for firms which are ready to adapt and enter new, fast-growing markets.

Digitisation is another, long-established trend in construction. For an industry with tight margins, it has become increasingly necessary for developers to keep up with the latest trends. Learn more about how digital technology is changing property businesses in our blog.

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