Impact of Covid-19 and projections for the future of the property sector
Simon Ellis, Partner and Head of Real Estate at Aaron & Partners, comments on the impact Covid-19 has had on the property sector and assesses the future of the industry.
In the role he has at Aaron and Partners heading up Real Estate, Simon brings his main areas of expertise commercial property and charity law to bear on the property sector, having acted for diocesan boards of finance, incumbents and sequestrators. Simon qualified as a solicitor following military service spanning Europe North America and Asia.
Simon Ellis, Partner and Head of Real Estate, Aaron and Partners
Covid-19 has had a significant impact on many areas of British life, as well as globally, including the commercial and residential real estate markets.
When asked for his view of the impact of the pandemic, Simon said:
“I can always get a sense of the state of the market just from the work flowing across my team and following COVID-19 it is down by around 50 per cent on what I’d normally expect for this time of year.
“The secondary impact is on deadlines, as once an organisation or individual has decided on a lease, sale, purchase or other transaction they want it done as quickly as possible. Now, there is less pressure to progress transactions at such pace, as people want the deals negotiated but are taking more time to reflect and consider, especially once any title or search defects or issues are reported. It is currently a more cautious market where we are in the North West, Midlands and Wales.”
Almost three months after lockdown was initiated by the British government in response to the spread of Covid-19 allows reflection on what could have been done better to prepare for the inevitable impact, that also needs to be balanced with an assessment of whether it would have been possible to implement anything different at that time.
Simon Ellis commented on the way the industry approached the pandemic response:
“Like a lot of sectors prior to the pandemic, the Real Estate market had emphasised on the speed of delivery, rather than quality and service. Organisations that took the time to focus on client experience and understand what each client valued now have goodwill and loyalty banked, and that will be extremely valuable for success in the market going forward.
“Focusing on service rather than short term gain was the best possible way to prepare for a turbulent time, although I think given the rapid spread of coronavirus and impact of lockdown, it would’ve been impossible for the whole sector to prepare comprehensively.”
With that in mind, as lockdown measures are eased, it is emerging from the experience that technology has helped and that the lessons learned might assist in driving innovation in the real estate industry.
Simon expressed his thoughts on technological innovation by saying:
“The sector has for a long time asked itself if it could benefit from increased use of technology, but the fundamental has always been that documents needed ‘wet ink’ signatures. However, a recent relaxation by the Land Registry to allow virtual “Mercury” signing reflects the need to adapt and will help to improve the market longer term.”
Because of this and the reaction to keeping the property sector on top of the challenges, it is likely that residential real estate is going to be forever changed following Covid-19.
Simon explained:
“Post lockdown, I suspect that interest from people in the size of their gardens will increase as they look to improve on their residential space. Home offices will also be in strong demand, and I anticipate a change from small 2nd, 3rd, 4th and 5th bedrooms into connected and efficient workspaces.”
On the subject of the high-wealth market and how much it would be impacted, Simon added:
“I think high-wealth markets could well feel a lesser impact, in a similar situation to the financial crisis over 10 years ago. Higher value residential markets could continue at a usual pace, while there will likely be much more turbulence for individuals competing in the First-Time Buyer market.”
As with other areas of the national and global economy, the burning question for the property sector is whether the markets are likely to return to the level experienced earlier in the year.
Simon responded:
“From an optimistic perspective, I think that the markets will bounce back quickly with the market on its right side up again in six months, but the reality is normality may only return perhaps six months after an effective vaccine is found. The market return is linked to wider progress on the virus and does not stand on its own.”
One of the interesting results of the lockdown measures was to insist that people should work from home wherever practical, rather than travel into offices and other locations. As a result of this, and workers become more familiar and comfortable with working from their own homes, it raises the question of whether the commercial arm of the property market will see a downturn.
Simon answered:
“Lockdown and being confined to our homes has presented an opportunity to consider work and home life balance more.
“Businesses will be more considerate when taking space, seeking the combination of a good environment, social interaction, shared knowledge and experiences. You can get technology and work from home, but remote working won’t provide all of the above, which are crucial for keeping employees engaged and motivated.”
Finally, as the country emerges from the pandemic and the various measures for lockdown, the furlough scheme and other economic responses, and social distancing are gradually eased, it’s understandable that many want to know what the expert’s projections of the future of the property markets are.
Simon’s response is clear:
“Coronavirus will change lots of things about our world, but it won’t change the fundamentals of Real Estate. Businesses still need premises, and people still need homes. I’m optimistic that the long-term future is still bright, but we can’t say when as lockdown restrictions and social distancing remains in place.
“There is a strong desire to get back on track within my team, and I know this will be replicated across the UK in many sectors. The main focus should be on working together as a team, coupled with the ability of individuals who look for the best in every situation and work hard to achieve a target or goal.”
Kindly shared by Aaron and Partners Solicitors
