While we have all been living under various lockdowns over the past year, one of the much-discussed areas of speculation has been how town and city centres might be impacted in our new, post-pandemic ‘normal’. With many of the activities that usually draw people into a city centre moved online overnight, to what extent might our habits be changed?
Office versus remote working
Cities bring economic benefits in the form of agglomeration and connectivity, which, among other things, spark innovation. Remote working might have maintained productivity throughout the pandemic, but the collaborative benefits of employee interactions within the office will still play a very important role in future working practices.
It’s still early days to determine the full extent to which firms are changing their working habits, but one recent survey by Deloitte suggested that most businesses in London will reduce their office space by c.20%. This is consistent with employee surveys, which indicate a preferred degree of flexibility would be to spend on average 3-4 days in the office, with the remainder of the working week spent at home, to maximise the benefits of the office alongside the convenience and cost-saving of fewer commutes.
There are clearly considerable downside risks to office occupational markets over the next five years. However, these results still indicate that city centre offices will continue to provide a key function in fostering collaboration and innovation amongst employees, and therefore the draw of a vibrant city centre will still remain.
There are cultural and social elements of cities that we are all sorely missing, of which city-centre venues such as pubs, restaurants, theatres and concert halls all provide. Shopping too, while more vulnerable to a move online, will still see some return of footfall as people seek the experiential factor of retail therapy.
But during the pandemic we have also become more aware of the benefits of local amenities, not only for convenience but also for the sense of community. People have also embraced the health and environmental benefits of a lifestyle less dependent on cars and trains, with our lockdown ‘daily exercise’ getting many of us out and about on foot or bicycle as a preferred mode of transport instead. A combination of all these factors mean we may see more of a move towards city-centre, ‘urban-village’ style living, with people favouring self-contained, amenity-rich areas over sprawling residential suburbs.
Cities are, and will always remain, a fundamental part of our society and the way we interact. Post-pandemic, we may see the impact of changing habits and preferences on our city centres, with more of a focus on mixed-use and local community rather than unchecked urban ‘sprawl’, but we believe that this is all part of the natural growth, vibrancy and resilience of our cities.
Property owners will need to react to these changes, and this is where a well-focused portfolio in good quality, sought-after locations, as well as an investment strategy of always looking at potential alternative use, will position the Fund well to respond and adapt to our towns and cities of the future.
The value of your investments and any income from them can go down as well as up and you may not get back the original amount invested.
BMO UK Property Fund invests in assets that may at times be hard to sell. This means that there may be occasions when you experience a delay or receive less than you might otherwise expect when selling your investment. For more information on risks, see the prospectus and key investor information document.
Interested in learning more? Download the viewpoint to discover more about our views on the future of cities in our post-pandemic world.