The recent Covid-19 outbreak is having an effect on individuals as well as corporations. Individuals and spending more time at home for leisure and work, whilst social interactions are limited. Corporations are facing the task of keeping income going, managing supply, counting on government stimulus and being innovative to survive past the crisis. These effects are inevitably going to impact the real estate office market.
The most obvious economic implication is decreasing demand for office space. Tenants will wait to see how events unfold before committing to new space. The economy is being hit hard and firms will reconsider moving to expensive offices and consider whether now is the moment to expand. As a result, landlords will need to readjust their expectations. Whether that be through offering more incentives, reducing rents, offering short term flexible leases, or being patient and waiting for the market to pick up again. Either way, existing tenants will be able to benefit from the situation. They will benefit if their leases are coming to an end of if they have a break clause coming up. Tenants could take advantage and negotiate new and reduced rents or threaten to walk away. Considering the current situation, landlords are likely to cooperate in order to keep their tenants in the building.
Another impact is the increase in work from home. This is encouraged by employers whilst also becoming the law in many countries (in order to contain the virus). Work from home was becoming a trend prior to the crisis even though many firms opposed it. They feared that productivity would fall and employees’ attention would not be work-related. Now, employers are left with little choice. The current situation will deliver more clarity on whether working from home will be more widely adopted in the long run. A couple of benefits include less time travelling and increased employee wellbeing. If proven successful, work from home will not be replacing the office, rather it will accompany it. The office will remain the place to close deals, make decisions, collaborate and build networks.
Real estate has also been experiencing several trends over the past couple of years. Some have become mainstream whilst others less. During the current crisis, the industry will find out which will accelerate and will require more time. One trend likely to increase is online property viewings. So far, online brokerage firms have unsuccessfully penetrated the agency market. Considering the current situation, It is no longer a case of online agents vs a traditional agent, as both industries are likely to merge. People are still expected to view properties, although the early stage of the search should be done online. Properties can be shortlisted, firms can get a better idea of what space and location they are after, whilst they are able to share the properties with all the team. With most viewings are currently put on hold, online viewings will inevitably increase. All agents (and specifically the traditional agents), must make sure they have a functional website, arrange viewings online with virtual tours and have computer-generated images or risk losing a market share to the online agents.
Video Conferences. In the short run, video conferences will undoubtedly replace meetings. This will prove that some meetings, especially non-essential meetings are more efficiently done online. This will allow people to spend less time travelling and allow more time to prepare and get ready for the next meeting. Key to video conferences is impeccable internet with limited lag, no buffering and high-quality coverage. This will make it authentic and keep everyone’s attention. important meetings will remain as they are key to creating relationships and make decisions.
One risk which must be avoided is over-reliance on e-mails. E-mails are a key part of businesses and should serve to facilitate communication, formalise and put things into writing. Nonetheless, it should not be there to take over real conversations as face-to-face conversations and phone calls build relationships & trust and are more than just a one-way communication through screens.