2022-02-06-牛津经济研究院-United_Kingdom_Population_decline_needn_t_mean_sub-par_CRE_returns_4页_463kb

Population Decline and UK Commercial Real Estate Returns

Overview

Oxford Economics projects that the UK population will begin declining in the late 2030s, which, combined with other factors, has led to a downward revision of the long-term all-property return index, trimming forecasts by 0.7 percentage points by 2050. This decline is based on updated ONS data and considerations of post-Brexit migration assumptions, which could reduce the 2050 population to 68.1 million compared to previous projections.

Key Implications

• Economic Impact: Falling population and working-age shrinkage will soften potential output and GDP growth. Total employment is expected to contract throughout the 2040s, with a significant reduction by 2050, contributing to a sustained structural reduction in real estate demand across many sectors.
• Trade-offs: While population decline risks sub-par returns, evidence from Japan (where all-property returns averaged 5.7% annually since 2010 despite a shrinking population) offers a counterpoint, highlighting periods of policy support like quantitative easing and currency depreciation as contributing factors.

Recommendations for Hedging Risks

• Major Cities: Focus investments on urban areas like London, the East, and South-East, which are expected to grow due to urbanization and agglomeration effects, offering protection against nationwide decline.
• Sector Diversification: Increase allocations to sectors benefiting from demographic shifts, such as healthcare, retirement living, and leisure, given the rising proportion of the population aged 65 and over (projected to reach 26% by 2050). However, this carries risks including dependency ratio strains and sector vulnerabilities, with not all industries able to respond effectively to labor shortages through automation.