Market Fundamentals & Demand Drivers

What We Mean by Market Fundamentals & Demand Drivers:

• Market Fundamentals: These are the core structural elements that define the supply side and operational context of a market. They represent the tangible and often quantifiable aspects that create the framework within which assets operate.
• Demand Drivers: These are the economic, social, technological, environmental, and political forces that influence the desire and ability of end-users, investors, or occupiers to utilise, acquire, or invest in specific assets. They dictate the level of absorption, pricing power, and overall growth potential within a market.

Our analysis is tailored to the specific nuances of each key sector we operate in:

I. Property & Real Estate Market Fundamentals & Demand Drivers

The property market is inherently local yet influenced by broader economic currents. Our analysis dissects:

• Market Fundamentals (Property & Real Estate):

  1. Existing Stock & Supply Pipeline:
     • Quantum & Quality: Total volume of existing commercial and residential stock, broken down by type (office, industrial, retail, residential, alternatives), age, grade (e.g., Grade A, B, C office space), and specification.
     • New Development Pipeline: Analysis of projects under construction, those with planning permission, and sites allocated for future development. This includes tracking completion timelines and potential impacts on existing supply.
     • Obsolescence Rates: Understanding the rate at which existing buildings become functionally or economically obsolete due to age, changing occupier needs, or new regulatory standards (e.g., energy efficiency).
  2. Vacancy Rates & Availability:
     • Headline vs. True Vacancy: Differentiating between actively marketed vacant space and “shadow space” (e.g., sublet space, space held off-market).
     • Absorption Rates: The pace at which available space is being leased or sold, indicating the health of demand relative to supply.
  3. Construction Costs & Viability:
     • Tracking material costs, labour costs, and overall development expenses.
     • Assessing development viability based on current costs versus achievable end values (rents/sales prices).
  4. Land Availability & Values:
     • Availability of zoned and serviceable land for different types of development.
     • Tracking land values and their impact on overall project feasibility.
  5. Planning & Regulatory Environment:
     • Local and national planning policies, zoning regulations, permitted development rights.
     • Ease and timeliness of obtaining planning consents, Section 106/CIL (Community Infrastructure Levy) contributions.
     • Building regulations, fire safety standards, and environmental compliance requirements (e.g., MEES – Minimum Energy Efficiency Standards).
  6. Infrastructure:
     • Quality and capacity of existing transport links (road, rail, air, ports), utilities (power, water, gas, telecoms), and digital connectivity.
     • Planned infrastructure upgrades and their potential to unlock new development areas or enhance existing locations.

• Demand Drivers (Property & Real Estate):

  1. Economic Performance (Macro & Local):
     • GDP Growth: National, regional, and local economic growth rates as key indicators of overall demand.
     • Employment Trends: Job creation (by sector), unemployment rates, and wage growth directly influence demand for office, industrial, and residential property.
     • Business Investment & Confidence: Levels of capital expenditure by businesses, business sentiment surveys, and foreign direct investment.
  2. Demographic Shifts:
     • Population Growth & Migration: Overall population changes, internal migration patterns (e.g., urbanisation, suburbanisation), and international migration.
     • Household Formation & Composition: Number of new households being formed, average household size, and changing living preferences (e.g., single-person households, multi-generational living).
     • Ageing Population: Impact on demand for specific property types like retirement living, healthcare facilities.
  3. Consumer Behaviour & Confidence:
     • Retail sales figures, consumer spending patterns, and consumer confidence indices impacting retail property.
     • E-commerce penetration rates driving demand for logistics and last-mile distribution centres.
  4. Interest Rates & Access to Finance:
     • The cost of borrowing for developers, investors, and homebuyers/businesses.
     • Lending criteria and the overall availability of mortgage and commercial real estate finance.
  5. Affordability & Income Levels:
     • House price to income ratios, rental affordability, and levels of disposable income.
  6. Specific Sectoral Demand:
     • Office: Impact of hybrid working models, demand for flexible office space, flight to quality (demand for modern, sustainable, well-amenitised buildings).
     • Industrial & Logistics: Growth of e-commerce, supply chain resilience strategies (onshoring/nearshoring), demand for advanced manufacturing facilities.
     • Retail: Evolution of physical retail, demand for experience-led retail, convenience retail, and omnichannel strategies.
     • Residential: Demand for different tenure types (owner-occupied, private rented sector/PRS/Build-to-Rent, affordable housing), student accommodation.
     • Alternatives: Demand for sectors like life sciences facilities, data centres (see below), self-storage, healthcare, etc.
  7. ESG Considerations: Increasing demand from occupiers and investors for sustainable, energy-efficient buildings with strong wellness credentials.