I hope that you had the opportunity to attend our recent global client webcast on the subject. To add colour on how this is affecting and might affect markets in the UK we have asked a number of our senior leaders and experts in the UK to write short, pithy perspectives and offer their insight of the current situation.
Richard Pickering sets the scene, asking whether this is a ‘Catalyst for Change’. He considers how, once the dust settles, things might change more permanently.
Greg Mansell assesses the Government’s ‘Crisis Playbook’. Lessons from the Global Financial Crisis have clearly been learnt and are reflected in the very rapid timing of the introduction of emergency measures, the daily escalation of these measures as the crisis has deepened and the coordination between The Treasury, The Bank of England and the Department of Health.
This will, of course, put the public sector and public sector real estate in the spotlight, writes John Keyes in his article, ‘The Public Sector Steps Up’. In the very immediate term this is about creating enough hospital bed space. In the medium-term it is about space the enlarged civil service needs to support rebooting the economy. In the long-term lessons will need to be learnt and more resilient hospital and health space created.
The sector of the property market most immediately and acutely hit by events has been retail. Discussing ‘Strains, Shifts and Spikes’ Paul Durkin observes that the virus is likely to cause a sharp acceleration of business failures against a backdrop of challenges, including adapting from in store to online. Friday's enforced closure of pubs, restaurants and leisure operations will also have a profound effect.
This is reflected in Paddy Knapman’s commentary upon the retail capital markets ‘A Blow to Confidence’ where a nascent recovery particularly in the retail parks segment has been stopped in its tracks. A turnaround will be dependent on a return to stability where investors have confidence in the income streams retail assets produce.
Addressing ‘Challenges and Opportunities’ in the logistics sector, Rob Hall and Richard Evans note ‘that whilst some transactions have faltered in the logistics and industrial market it is showing some resilience’, particularly from those with long term strategic requirements in the pharmaceutical, nutrition, sports and leisure and public sectors.
The focus, however, of the moment is on the immediate short-term requirements of the food sector to accommodate the shift to online brought about by the pandemic. This trend is forecast to continue in the medium-term as education during the crisis leads to greater online demand for food. The longer-term prospects for this sector are also strong as the exposure of weaknesses in global supply chains leads to reshoring of manufacturing.
Low office vacancy rates in all of our major cities will give these markets greater resilience than in previous economic downturns. In his note on ‘Assimilation and Acclimatisation’, Richard Howard makes the point that whilst some smaller deals are not being completed, many of the larger pre-lettings are progressing against a background of competition for larger units of space in an undersupplied market.
Similarly, Ben Cullen, discussing ‘Occupier Decision Making’, sees a period of intense activity once we are through the current hiatus as occupiers scrabble for space. He addresses the subjects of timing, opportunities, short term pain, and what’s next.
In parallel with the office occupational market, the fundamentals for the London capital markets are thought to be sound with a basic analysis showing strong international demand and low levels of supply. More nuanced commentary on ‘Temporary Dislocation’ from Richard Womack and Andrew Hawkins shows a market moving quickly into a new cycle where physical real estate will find favour against a dislocated market for equities and treasuries.Finally, in her note on how COVID-19 will affect the ‘Future of Work and Workplace, Nicola Gillen observes how an enforced period of working from home is making us overcome inertia and accept what for some has long been a way of life. She argues managers will now see the productivity, health and wellness benefits whilst businesses will see scope for cost saving. Most profoundly Nicola contends that this will reduce the size of offices in the future and change the nature of what we do there to a focus on meeting, sharing and socialising whilst a lot more of the ‘work’ takes place at home.
Please do get in touch; we stand ready to help you navigate through these uncertain times.