Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting to read:%0A%0A {0} %0A%0A {1}

Outlook for 2021: Small prizes and big penalties


Who knows what will happen next year? The pandemic has limited our predictive horizons to weeks and months at best – or perhaps that’s always been the case! At least, now, we can look to 2021 with humility and an open mind.  

In a collective moment of introspection, occupiers are reviewing their existing portfolios to understand what space they need, and, in turn, investors will decide what assets they want to own. As a result, the difference in investment performance between sectors, and assets within each sector, will be highly polarised. Some buildings will be in high demand, while others will struggle. 

Although the economy will continue its recovery next year, it will still feel like a downturn. And, as always with downturns, the prizes for those that make the right decisions will be small, while those that make a mistake could suffer big losses. 

How will the economy perform in 2021? 

Fast growth doesn’t mean the economy is strong. The economy should grow by 4.4% in 2021, according to our base case. There are two things to keep in mind. First, annual growth could briefly hit double-digits by next summer, but this overshoot is just volatility in growth rates created by the sharp drop in output in April 2020. As a result, the impact of Brexit on the economy will be almost impossible to determine. Second, economic output will not be back to pre-covid levels by the end of 2021. The economy still would be eating into slack capacity.  

Hours worked will slowly increase, despite job losses. Two million people were still on furlough when the Government extended the scheme into November 2020. The successor, the revised Job Support Scheme, gives workers less protection but does give employers the “option of keeping their employees in a job on shorter hours rather than making them redundant.” Total hours worked should increase throughout 2021 keeping the economic recovery on track, as furloughed staff return to work. However, mass job losses are inevitable, and unemployment should peak at close to 3 million people in the second half of 2021. 

The Treasury will try to inspire more private spending. Fiscal policies introduced since March 2020 have cushioned the drop in private demand. New schemes, in the same mould as Eat Out to Help Out, will struggle to stimulate a meaningful and sustained increase in private spending while consumer sentiment is weak. Nonetheless, we expect another year of heavy fiscal stimulus. Tax hikes and other measures to consolidate the government debt pile – already over £2tn – is likely to come in later years. 

Central banks plug the gap in demand with more cash. The Bank of England can still buy another £80bn of gilts before hitting its £745bn limit. It has recently slowed the pace of its buying to keep some powder dry but will undoubtedly expand its asset purchasing programme again if needed. Interest rates will stay low and negative interest rates on short-term debt are likely. UK 10-year gilt yields will be close to zero next year, perhaps rising above 0.5% if the economic recovery stays on track. 

Inflation will be volatile, but deflationary pressures will be strongest. Inflation will stay below the 2% target throughout 2021. Volatility will come as energy prices fluctuate and fiscal policies change – for example, the end of the Eat Out to Help Out scheme boosted inflation by over 20bps in September. But given weak demand from businesses and households, disinflation and short periods of deflation are more likely next year than high inflation. Major central banks have put over £5tn into their economies since March, but inflationary pressure is unlikely considering the economic slack.

What factors will drive pricing in 2021? 

Income quality will be a stronger driver of pricing than asset quality. In the 2007-09 downturn, the most resilient properties were those with the longest leases. Whether an asset was “prime,” or its location “core,” was temporarily irrelevant – if the asset’s lease was so short that re-letting in the ongoing recession was inevitable, its value fell. Long-term property investors should focus on location and asset quality, as those factors drive performance over a cycle. But, right or wrong, risk aversion to income risk tends to trump other factors in downturns and will dictate pricing trends in 2021. 

Will people want to be in this building in future? The accelerated pace of shopping online and working from home has proven milestones once slated for the distant future can pass in a matter of weeks. The pandemic and the ongoing recession have occupiers of all property types reconsidering where they want to be and how much space they need. Real estate investors must review each asset and honestly answer: will people want to be in this building in future? Buyers’ attitudes to obsolescence will have a greater effect on asset pricing in 2021 than in previous cycles. 

What are the biggest risks in 2021? 

A lack of real estate debt could limit buyers’ options. Lenders need to refinance loans worth over £43bn in 2020/21 according to the CASS UK Commercial Real Estate Lending Report. To put that into context, new loan origination in 2019 was £44bn. There is a wider range of bank and non-bank lenders today than in 2007-2009, but those lenders will struggle to keep their pace of lending. A financing gap is likely, given the weaker economy, material uncertainty on valuations and large drawdowns on existing facilities. These factors curb the appeal of new lending and, ultimately, will limit investment activity in 2021. 

Insolvencies will rise, but by how much? Reported company and individual insolvencies have been far below normal since lockdown. New government measures, reduced HMRC activity and reduced operational running of the courts combined to keep insolvencies artificially low. Government support will reduce and measures, such as the Corporate Insolvency and Governance Act 2020 (CIGA), will wind down. Only then will the fallout from the pandemic be clear. With millions of people on furlough and many tenants failing to pay rent on time, default rates in 2021 could be higher than in the Global Financial Crisis. 

Our outlook 

Logistics are the top performing sector…again 
We forecast 28 sector and geography combinations. Total returns for these markets will spread across 14 percentage points in 2021 – half should deliver positive returns and half will likely register losses. Seven of our top 10 markets are in the logistics sector, with prime logistics in the Midlands topping the list with returns over 10%. 

Prime retail returns bottom out in 2021 
Prime retail recorded heavy losses in 2019 and the same is true this year, with most markets down around 20%. Next year will see losses stabilise and limited to single figures. Some markets will see low, positive returns in 2022. Long-run returns will trend around 7% a year thanks to high income returns and moderate growth from rebased rents. 

The office recovery won’t hit full speed until 2022 
While logistics returns will still be strong in 2022, most office markets will have started their recovery. Prime offices in Bristol should be the top performer in 2022, thanks to the extremely low availability of prime space. 

Data and Pharma sectors pique long-term investors’ interest
Beyond the forecasted markets and looking longer term, data centres and life sciences will emerge as the top picks within the specialist sectors. Both benefit from heavy institutional and private equity investment, and strong technological and demographic trends, respectively. 

Latest articles in this series

Leeds North Star cafe closure COVID-19
Insights • Economy

Outlook for 2021: Small Prizes and Big Penalties

Long-term property investors should focus on location and asset quality, as those factors drive performance over a cycle. But, right or wrong, risk aversion to income risk tends to trump other factors in downturns and will dictate pricing trends in 2021. 
Ship with shipping containers
Insights • Retail

Retail & Supply Chain

2021 will continue to see growth in e-commerce and logistics demand and new retail supply chain models will be required to capitalise on the structural shifts in the sector.
Paul Durkin • 04/11/2020
George Roberts Cushman & Wakefield
Insights • Commentary

How 2021 Might Reshape The Real Estate Industry

We will look back at 2020 as the year in which COVID-19 accelerated forces of change. These forces will shape the industry for many years to come and for those that are able to interpret and take advantage of them, the opportunities are enormous. 
George Roberts • 04/11/2020
Europe on globe, Linköping, Sweden
Research • Investment

European Forecast & Fair Value Index

The latest data insight on commercial real estate investment opportunities across Europe.
Research • Workplace

Experience per Square Foot™ (XSF)

Gain data and insights to move forward with confidence.
Bryan Berthold • 24/09/2021
Lorry unloading at warehouse
Research • Logistics

UK Logistics & Industrial Regional Outlook

The UK Logistics & Industrial National Outlook report analyses quarterly UK industrial and logistics property activity across the UK including demand, market supply and pricing trends with an outlook to future trends in this property sector. 
Sector Resilience in Office Space Card Image
Research • Workplace

Regional UK Office Market: Sector Resilience

This research examines the resilience of key business sectors in the regional UK office space market and includes a UK Regional Risk Index.  
Tampa Distribution Center
Research • Industrial

The Changing Face of Distribution

Technology and multi-modal solutions are ready for implementation and offer solutions to the logistics industry.
Rob Hall • 14/01/2019
supply chain (image)
Research • Logistics

Warehousing to Address Supply Chain Disruptions

The importance of supply chain resilience has never been more apparent. As businesses look to reduce the vulnerability caused by disruption, we have seen a fundamental change in how and when they distribute goods.
David Hutchings • 13/09/2021
dna graphic
Research • Investment

DNA of Real Estate

DNA of Real Estate tracks prime rents and yields in 46 cities across Europe, covering the key office, logistics and high street destinations. It has an overview of quarterly performance, and a summary of prime rents and yields for the cities and markets.
Nigel Almond • 12/05/2022
man and working at desks in modern casual office
Research • Coworking

European Coworking Hotspot Index

Our European Coworking Hotspot Index is focused on identifying ‘where next’ for coworking across Europe. By understanding where coworking is likely to go next, landlords and operators of commercial real estate can be on the front foot with respect to rethinking the design of their traditional office space.
Oxford Street, London
MarketBeat • Office

Central London MarketBeat

Central London Marketbeat provides an overview of the occupational and investment markets across Central London on a quarterly basis.  

Battersea Power Station Development Co
Battersea Power Station Development Company • Retail
Battersea Power Station is an iconic 42-acre development on the south of the River Thames.
Learn More
London Big Ben Westminster Bridge sunset
MarketBeat • Insights

UK MarketBeat

Cushman & Wakefield MarketBeat reports analyse quarterly UK commercial property activity across office, retail and industrial real estate sectors as well as the Central London residential market. Find data on supply, demand and pricing trends at the market and submarket levels.
Spinningfields, Manchester
MarketBeat • Insights

UK Regional Office MarketBeat Reports

UK Office MarketBeat reports analyse quarterly supply and demand levels for office property across key UK cities and include pricing trends.
Brindley place
Hines • Retail
Developing a forward-looking strategy for one of Birmingham’s prime assets.
Learn More
Boden HQ amphitheatre
JP Boden & Co • Retail
Fashion retailer JP Boden & Co wanted to expand its London head office to accommodate business growth and more agile working. Our Project & Development Services team created a connection between the main office into a newly refurbished warehouse/hangar space, creating one large single workspace that reflects the Boden brand. 
Learn More
Prague’s Newest Retail and Leisure Destination
Savarin is a brand-new destination for shops, restaurants, cafes and entertainment in the heart of the city.
Learn More
Elena Pemberton and Richard Wateridge receiving the Platinum Clean City Award 2020
Platinum Clean City Award

Cushman & Wakefield has been recognised for its commitment to improving the environmental performance of its corporate offices.


Lorry unloading at warehouse
Availability Of UK Logistics Space Falls To Record Low As Take Up And Investment Head For New Annual Highs

Demand for UK logistics and industrial space continues to power ahead with the 16.1 million sq ft taken in Q3 pushing availability to record lows, according to new data from Cushman & Wakefield


Student Apartments
UK Student Accommodation Sector Remains Upbeat

Investment in the UK student accommodation market hit a record £5.15 billion in the first seven months of 2020, despite a fall in transactional activity since February.


Commercial Real Estate Technology
Omnicom Europe Limited • Technology
<p>Omnicom Europe Limited had to relocate from over ten properties into one over 4 years.</p>
Learn More
Entre Deux Maastricht INVESCO
Invesco • Banking & Financial Services
<p>IREEF is a flagship fund of Invesco Real Estate comprising core and value-add assets across Europe.</p>
Logic Leeds
Leeds City Council completes sale at Logic Leeds

Disposal of Building One and Units 5 to 7 at West Yorkshire industrial and logistics hub generates a significant financial gain for the council.


Belgian hospitality industry
Cushman & Wakefield Appoints Head of Benelux Hotel Transactions

Cushman & Wakefield has appointed Dennis Leib as Head of Hotel Transactions for the Benelux region.


Rainbow flag Cushman & Wakefield Unity
British LGBT Awards

Cushman & Wakefield, has been shortlisted in the British LGBT Awards.


GOS IPM banner
Cushman & Wakefield Makes Four Senior Appointments in EMEA Integrated Portfolio Management Team

Cushman & Wakefield has made four senior EMEA appointments within its Global Occupier Services (GOS) business, which delivers outsourced real estate solutions to help companies and institutions achieve their strategic goals


Total Workplace
Cushman & Wakefield Expands Total Workplace Team With Four Senior Hires

Cushman & Wakefield has expanded its Total Workplace team, which advises real estate occupiers, developers and owners on how best to achieve strategic goals through the workplace, with four hires in EMEA.


Belgian hospitality industry
Cushman & Wakefield Appoints Head of Benelux Hotel Transactions

Cushman & Wakefield has appointed Dennis Leib as Head of Hotel Transactions for the Benelux region.


George Roberts Cushman & Wakefield
Cushman & Wakefield Makes 64 UK & Ireland Promotions

Recognition across Cushman & Wakefield’s UK&I-based business lines and Global Occupier Services


What's Next for Offices Post-Event
What's Next for Offices Post-Event

Our virtual event, What’s Next for Offices, invited Derwent London, Pearson plc, HB Reavis along with other workplace specialists, to explore changes in the office sector, make predictions for the market and discuss the role of offices in building a sustainable future.

Ben Cullen • 09/11/2021

UK banknote close up of Queen's face
Budget Reaction

Cushman & Wakefield experts from across the UK react to this year's budget and what it means for property.


Sadaqat Hussain
Sally Bruer
Cushman & Wakefield Expands Logistics & Industrial Expertise with the Appointment of Sally Bruer

Cushman & Wakefield continues to make significant investments in strengthening its market-leading sector platform with the appointment of Sally Bruer as Partner – Logistics & Industrial, Insight & Strategy EMEA.


woman on sofa talking to colleagues gathered around
Cushman & Wakefield UK Announces Further Declines in Gender and Ethnicity Pay Gaps

Cushman & Wakefield has further reduced its mean UK gender pay gap to 29.2% in 2021, as the firm continues to progress its commitment to supporting a diverse and inclusive workplace.


High Rise Multifamily Property
Cushman & Wakefield Creates New Head of Enterprise Sales, EMEA role

Cushman & Wakefield Creates New Head of Enterprise Sales, EMEA role 


Building Health Checklist card image
Cushman & Wakefield Expands EMEA Project & Development Services Team With Senior Appointments

Cushman & Wakefield has made several senior appointments to its Project & Development Services (PDS) EMEA team, boosting client account management capabilities across its regional business.


Demand for UK Logistics Space Shows No Sign of Slowing Down

Demand for UK logistics and industrial space shows no sign of slowing as transactions in the first quarter of 2021 increased by 115% compared to the same period last year, while the number of deals completed was 70% higher than a typical Q1 according to data from Cushman & Wakefield.


Tom Rigg, roadside property specialist
Self Storage graphic
Demand for UK Self Storage Space Remains Robust

Demand for self storage space in the UK remained robust in 2019 and the sector is well placed to deal with the impact of COVID-19, according to new research into the sector’s major operator and customer trends from Cushman & Wakefield and the Self Storage Association UK (SSA UK).


Ned Jones to Head Birmingham Capital Markets Team

Cushman & Wakefield has appointed Ned Jones to head its Capital Markets team in Birmingham.


Ben O'Connor Cushman & Wakefield
James Woolley
James Woolley Joins Student Accommodation Team

Cushman & Wakefield has appointed James Woolley to its Student Accommodation valuation team from Knight Frank.


Retirement Living stock image couple
C&W Advises Revera on PGIM Real Estate Senior Housing JV

Cushman & Wakefield’s Senior Living team has advised Signature Senior Lifestyle, a subsidiary of senior living sector owner, operator and developer, Revera Inc. on the creation of a new joint venture with PGIM Real Estate.


Storage World
Hot Housing Market And Multigenerational Living Drive Record Boom For Self-Storage

Cushman & Wakefield and the Self Storage Association UK launch 16th annual industry report.


older man and younger man with Down's Syndrome laughing
Cushman & Wakefield Advises Triple Point Social Housing REIT Plc on Voyage Care portfolio

Cushman & Wakefield Advises Triple Point Social Housing REIT Plc on Voyage Care portfolio 


Related Services

Asset Services
Consistent across EMEA, to ensure buildings and people thrive.
Learn More
Valuation & Advisory

Giving you the confidence to make informed decisions.

Learn More
Capital Markets

Are you ready for what’s next in the real estate industry? Our Capital Markets team advises institutional and private owners, occupiers, investors and developers on their most significant transactions.

Learn More


Get in touch with one of our professionals.
With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Cookies.
Agree and Close
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All