Research Letter – May 2026

We open our latest letter by reflecting on the growth of the flexible office market and explaining why we think it has developed an inherent structural weakness. Although demand for flex space is now embedded in occupier behaviour, the market has never settled on how to value income generated by flex operators. This has created a feedback loop: flex income is discounted because it is perceived as risky, operators respond by accepting unsustainably high rents, and rising operational leverage makes financial distress more likely. We see this pattern as avoidable and, in some cases, self‑inflicted. Against that backdrop, we argue that the operators best positioned to endure are those that own their assets or operate capital‑light management models, rather than relying on conventional lease structures. We have more to say on the topic, so keep an eye out for future reports from us!

From there, we turn to retail, where we use recent data to challenge the lingering assumption that the sector is structurally broken. We show that low vacancy rates, solid rental growth, and thin development pipelines are beginning to translate into strong returns. Within that recovery, we highlight grocery‑anchored and convenience‑led formats as particularly well positioned, illustrating how incumbents have successfully combined physical networks with digital fulfilment – to the point where technology firms are now converging on the same model.

We close with two broader reflections. One explores how the economics of drone‑based warfare could create a near‑term opening for Europe’s industrial base. The other sets out why, despite rapid advances in AI, we remain sceptical of claims that white‑collar work – and offices – are on the brink of rapid obsolescence.