As we embark on 2024 James Mohsen MRICS takes a look at the real estate landscape: We are at a crossroads with global elections, challenging debt dynamics, sustainability imperatives, and an ever-evolving occupational market all playing their part. We take this opportunity to share our thoughts for the year ahead and delved into some of the key topics that we believe will be key to navigating this dynamic environment.
Debt Dynamics
Following the changing interest rate environment through 2022 and 2023, debt remains a focal point in our industry. The quantum of real estate loans up for refinancing in the next 12 months may trigger distressed sales, presenting opportunities for investors to acquire properties at favourable values. Oxygen Asset Management has successfully acquired and restructured non-performing loans in previous economic cycles and generated exceptional returns to investors. We are expecting opportunities to present themselves over the course of the year.
Sustainability: A Non-Negotiable Factor
With the built environment contributing an estimated 40% to global carbon emissions, sustainability remains a driving force in real estate. Legislation like MEES mandates upgrades, estimating £370 million needed for London office buildings to comply. Forward-thinking landlords recognise that integrating sustainability features not only complies with regulations but attracts best-in-class tenants pursuing environmentally conscious spaces aligned with ESG targets.
Retrofitting: Unlocking Value in Existing Assets
Amid elevated development costs, the prospect of new developments remains constrained. This challenges landlords to innovate in adding value to current assets. Adaptive reuse of existing buildings is a key focus for Oxygen in reducing embodied carbon, whilst embracing and pushing for more cradle-to-cradle thinking in our retrofits of office buildings. This year will see us reuse even more than last, promote adaptability and design for deconstruction, use innovative low carbon products and continue to push the boundaries of what is possible in a holistic response to creating best-in-class, sustainable office buildings.
Occupational Market Dynamics: A Shift from Remote to In-Person
The occupational market is experiencing another transformation, moving from remote work back to in-person engagements. Companies are reassessing their office needs, creating positive prospects for commercial real estate. Giants like Google and JP Morgan, opting for enforced hybrid work models, emphasise the importance of physical office spaces. Firms are realising that a physical HQ is crucial for culture building, collaboration, and productivity, prioritising quality over quantity in workspace.
As we navigate the industry in 2024, embracing resilience, sustainability, and innovation, the real estate landscape will present opportunities for those ready to adapt and thrive in a dynamic and ever-evolving market.