The productivity of Britain’s labour force and the real estate they occupy has been dramatically transformed over the decades. Transformed because many of us can be productive in a host of real estate settings. And underlying this transformation has been Britain’s labour force becoming what we would argue is the prototype service economy.
In its most reduced form, the productivity of property can be measured by the cumulative output of those ‘working’ in it. Once this would be confined to the single shift, or what one could call the ‘nine-to-five’ rule. Until relatively recently, many Britons were essentially only productive in their work situ. For those employed across ‘hard’ industrial sectors, their productive day could not begin until they had arrived at the real estate dedicated to their occupation. Similarly, for those across service sectors, albeit here one could arguably identify additional productivity as it were in the form of ‘home work’.
Even this however was restricted by relatively limited remote office access. Matters are very different now, because more Britons than ever before are involved in ‘soft’ service sectors. And very different because of how technology has allowed so many of us to be productive even when remote from our designated place of work, notes Maxine Fothergill. The result has been to empower or make productive whichever property we occupy, whilst working off-site, but online. We are productive in transit and we are productive even in recreation. And what this has done is transform how we measure the productivity of Britain’s real estate.
Fothergill goes on to point out that transport real estate such as airports and train stations has been empowered. Consider too other real estate housing restaurants and retail. It is not only the cooking and waiting staff who can be said to be productive, but those diners enjoying a working meal. It is not only shop assistants who are being productive, but their customers using remote tools such as iPhones and androids, iPads and laptops between spending forays. The result of this technology transformation should have included a transformation in how we measure the productivity of real estate. And yet it hasn’t, or certainly hasn’t to the meaningful extent it should have (see arla.co.uk for more on this).
The bulk of UK housing stock is owner-occupied and, for better or worse, this does not count as commercial. Similarly, local authorities and housing associations provide much of the rented housing and this is also not commercial. The growth of the various sectors since 1981, during which time the number of owner-occupied properties has more than doubled while the private rental sector fell sharply up until 1991, but has experienced rapid growth more recently, particularly since 2001.
Around 18.6% of the UK housing stock is in the private rented sector. It includes both major residential developments such as blocks of flats, but also a substantial small scale activity where individual landlords ‘buy-to-let’ one or a small number of properties. Data on housing is collected separately for England, Wales, Scotland and Northern Ireland.
The Department for Communities and Local Government’s (DCL G) latest number of dwellings figures have been updated to 2014 except for Wales and Scotland, where we used a linear regression analysis to forecast the 2014 value, as Fothergill mentions in this vimeo.com video.. We had a complete list of data for England and Wales rents from LSL Property Services, but wanted to use the larger rental datasets from the VOA, Statistics Wales and NI Housing Executive. So we took the LSL rental dynamics and applied them to the larger datasets.
Adding the estimates for each country gives a UK value of total rental income from private sector dwellings of £45.7bn (2014). Lastly, this estimate has to be reduced to reflect voids – property left empty and providing no service. It is customary to assume properties are on average empty for one month a year, so the actual rents generated fall short of the full occupancy potential by around 8%. Reducing £45.7bn by 8.3% gives a figure of £41.9bn. This measures the contribution of private rented housing to GDP.
The income attributable to commercial property accrues in the first instance to its owners. It may be thought that as most people do not own commercial property, this is of no great interest to them, but such a conclusion would be wrong.
Office buildings are often owned by property companies, but these too need finance, again sometimes through the issue of equity capital, but often through debt (corporate debentures or loans). Such debt may be put up directly by households or provided by other financial institutions such as banks, which in turn raise funds from households. Likewise in the housing sector, much ‘buy-to-let’ housing is financed through mortgages from banks or building societies. The rental income generated thus pays the interest households receive on their bank or building society deposits.
