On the 18thGod’ In November, the City Center hosted the second of three events in collaboration with L&G, which examined the significance of Covid-19 for the future of cities. The online panel discusses the future of urban life and the impact of domestic work on the demand for housing in the city.
This blog describes the main issues that came up during the discussion between Dan Batterton (Senior Fund Manager, Build to Rent Fund, LGIM), Timothy Bannister (Data Services Manager, Rightmove), Samantha a calf (CEO of Blueprint Regeneration and Co-Head of Igloo Development Services) and Andrew Carter (CEO of City Center).
There was no “city collapse,” but the plague changed the way we think about space
Similar to the theme of the first panel of this series, the idea of the city as a place of residence survived and prospered during the plague. The overall picture is that people want to stay and live in cities; According to Rightmove, the total demand for properties in the city has increased by 34% for sales and 46% for rent in the last two years.
However, the result of the epidemic was a change in demand for living spaces. Rightmove cited three findings from an analysis of cumulative inquiries from homeowners in the sales and rental markets; First, the significant decline in demand for home removals in March 2020 increased very rapidly and continued over the past 18 months; Second, the “what” and the “where”, regarding the types of homes that people are looking for and their location respectively, have changed and are still evolving; And finally, this market dynamic differs significantly across the country, especially between and within cities.
Demand for properties illustrates the compromise between city centers and the countryside, while seat belts remain popular
A common theme across the country was the “space race”, where people now expect more space inside their homes (in the form of additional common space for work), around their homes (such as balconies, gardens and roof terraces), as well as outdoor space in the form of green spaces, proximity to the beach or Location in the countryside. This can be shown by changes in demand for property types, where there was initially demand for homes after the first lock in 2020, but apartments have led the increase in demand recently, with 1 and 2 bedroom apartments now being the most popular property type (as of October 2021).
Although Rightmove’s figures indicate an increase in aggregate demand for city assets, the “space race” has indeed led to an increase in the number of city residents seeking to leave cities from 40% to 50% between October 2019 and October. 2021. But it was different depending on the city, which shows that the local dynamics prevent the behavior of housekeeping; For example, Manchester achieved the first score for both sales and rentals for out-of-town inquiries, compared to London in third place for sales inquiries but in last place among the top 10 cities in the UK for rentals.
The spread of referrals shows the development of demand for certain locations. Before the plague, those looking to move from London were looking for properties quite close to the capital, for example in Bristol, Brighton and Canterbury. The data for May 2020 show a strong response after the unlocking, with increased interest in coastal and rural areas, although this has subsided in recent months.
There has also been an increase in demand for housing in the outlying districts of cities, especially compared to January 2020 to May 2020, with Rightmove heat map data showing an increase in sales inquiries outside Manchester and London centers. It has calmed down a bit since for London, but remains strong for Manchester, proving that seat belt placement has remained popular for cities at various levels.
Net zero and changing consumer preferences are what drive supply considerations
From a supply side perspective, the challenge of reaching net zero and changing preferences means that the way we think and plan cities is likely to change. The positive consequences of overcrowding in cities have been highlighted by L&G; Among other things, infrastructure like public transportation is better able to serve crowded urban environments. According to L&G, the focus should be on increasing the supply of housing through urban density instead of encouraging people to enter the green belt. The City Center has written a number of reports on the importance of planning reform in encouraging overcrowding that will be a key tool for cities to reduce their carbon emissions.
L&G also emphasized how the carbon footprints of buildings are increasingly appearing among residents ’specification requirements. Rightmove has recognized that it is still too early to say that residents are completely driven by the carbon footprint of a potential home, however this will likely appear to be a major issue over the next few years; 58 percent of people surveyed said the EPC rating is an important consideration for their next home, but 82 percent said they would consider it for the home afterwards.
People also place increased emphasis on the sense of community when choosing where to live. Blueprint noted the importance of investing in social capital that paid dividends throughout the epidemic, during which people became much more reliant on their neighbors for interactions and support. Rightmove added that over 30 percent of city dwellers prefer their homes more after the plague compared to its predecessor due to their local communities.
The ongoing balance between office work and home work will also have long-term implications for the supply of homes. A major challenge for space providers will be to balance the lead time needed to plan and build a space with the unknown around the question of whether work from home will remain the norm in two years, and what that means for built environments.
In the future, the importance of cities will last, but what it looks like in practice is still unclear
The ongoing legacy of the epidemic will be one of reinvention for cities. Rightmove noted that we need to continue to examine early data and indicators to gauge the long-term impact of the epidemic on the asset market. For example, cities are now more important than ever for younger age groups, especially given their appreciation of the cultural and social offerings of cities, while their desires to reduce daily travel times have grown throughout the plague. This will have implications for space supply and demand in the longer term.
You can watch a recording of the event through the City Center YouTube channel, here.
The event was held in collaboration with L&G.