The future of city centres
City centres are on the brink of massive structural change. The Covid-19 pandemic has accelerated the transformation of the retail sector. At the same time, the logistics sector is booming and moving closer to city centres. What needs to be done to maintain a high quality of life in our city centres?
This crucial question can be answered only by adopting an interdisciplinary approach, and by applying a great deal of creativity and market knowledge. Union Investment is rising to this challenge and applying its wide-ranging expertise in investment and asset management. In addition to the long-established trends of digitalisation and sustainability, the cessation of traditional types of use is the dominant issue. There is a general transformation to mixed-use properties and neighbourhoods. A smoothly functioning interplay of different types of real estate properties is developing in such mixed-use spaces that takes into account people’s changing needs. In revitalising city centres, the transformation to mixed-use developments that has begun could present a great opportunity for future-readiness, efficiency and sustainability. The more flexible, the better – because demand trends remain volatile.
The infographic shows the opportunities and growth potential that Union Investment envisages for each type of use.
Take a look at the opportunities and growth potential that Union Investment envisages for each type of use.
The rapid rise in online trade is boosting demand for logistics facilities. Recent years have seen vast improvements in their structural quality and flexible functionality. In addition to large warehouses on the outskirts of cities, some of which are even multi-storey buildings, there is also an increasing number of logistics properties in city centres for last-mile deliveries. However, major changes are also on the horizon within the buildings: Digitalisation, together with robots, drones and other technologies, is playing an ever greater role here. For Union Investment, logistics properties have become more than just an addition to its portfolio – they represent a strategic building block for growth.
Working from home as a permanent component of a new work culture does not mean that conventional office workplaces will become a thing of the past. There is no sign of a slump in demand for office space, especially in prime locations. The possible vacation of premises will be spread over the coming years because of existing leases and will probably be offset by the rising number of office employees. Office space secured over the long term will therefore be an essential component of a hybrid workplace ecosystem for businesses in the future – as anchor spaces for brand identity, for attracting talent and for functions that need to be carried out in person. These anchor spaces will be complemented by flexible, mobile and increasingly digital workplace models.
The Covid-19 pandemic has led to a crisis in the hotel industry, a crisis it has had to undergo through no fault of its own. However, this is only a temporary challenge and thus not a structural crisis. As long the Internet cannot replace a bed and video conferencing cannot replace the value of face to face encounters, the industry will not lose out to any essential trends. Union Investment remains a strong partner of the hotel industry, monitoring and promoting the development of new resilient concepts in its portfolio. Our focus here is on leisure hotels. During the crisis, Union Investment is relying on active asset management and investments in the portfolio including complex structural modifications, restructuring and early lease extensions to ensure that the properties and user structures are ideally positioned for the future.
Union Investment continues to focus on a strong and future-oriented portfolio of commercial properties, retail parks and shopping centres. Retail parks and local shopping centres selling large shares of food are becoming increasingly important here. New resilient concepts for the retail sector are being developed. These include not only the combination of shopping, delivery and pick-up and collect services, but also the transformation or repurposing into multi-use properties. This reuse or repurposing of retail properties is benefiting from the increasing competition for space in urban areas. There are various conversion opportunities available depending on location, physical space and financial considerations.
People will always need somewhere to live and residential property will always be in short supply. Union Investment is focused on micro-living. Temporary living solutions with limited space is not a passing fad, but rather the answer to socio-demographic changes and increasing flexibility in the work and education spheres. There is a gap between supply and demand, particularly with regard to small apartments in large cities – a gap which Union Investment endeavours to close by focusing on student and micro flats as well as on serviced apartments. With its acquisition of ZBI, which specialises in residential property, Union Investment is building up expertise to implement its strategies and laying the foundations for further growth.