Market activity falling, innovation surging during lockdown – RICS professionals
Our second survey of RICS professionals on the impact of COVID-19 understandably continues to reflect some of the big challenges facing the sector.
- 64% of firms experienced reduced cashflow since the start of lockdown
- 37% of construction projects cancelled by July (compared to 29% in April)
- 66% of firms implemented business innovations due to impact of COVID-19
Most notably, it shows that those professionals surveyed across the UK reported a decline in business with 55% seeing a decreased workload (compared to 80% in April) and 52% (compared to 67% in April) seeing a decrease in new business enquiries. Against this backdrop, it is not surprising that reduced cash flow is being experienced by 64% (compared to 69% in April) of respondents.
In what has been a very difficult period, reports of delays to projects have predictably increased; RICS Professionals are suggesting that this is has affected around four-fifths of projects as roughly half of all construction sites closed. Significantly, feedback to this survey indicates that just over one-third of projects have now been cancelled. This compares with 29% in the April survey.
A growing number of professionals have supported infrastructure development due to the covid-19 pandemic with 6.5% RICS professionals directly involved in NHS projects (compared to 2.5% in April).
Although the picture is slowly changing, 39% of respondents suggested their colleagues were still working from home (compared to 49% in April). Meanwhile, 29% reported an expected return to office working by September. A similar number of the profession remains on furlough in July; 50% compared 51% in April. Only 3.25% cited no impact of Covid-19 compared to 1.1% of the profession in April.
Insight from contributors suggests momentum in the real estate sector is still weakening. The commercial market has been particularly impacted due to closure of retail, leisure and office premises. An increase in requests from occupiers for rent and business rate suspension has been reported with 39% clients seeking a rent holiday and 18% occupiers seeking help with service charge payments (up from 13% in April). The residential property market is a little more upbeat following its reopening with only 8% requesting delays to completion (compared to 16% in April).
Looking forward, a majority of the profession surveyed (61%) are cautiously optimistic on the prospect of UK economic recovery in the next 12-24 months. Around one-third are more downbeat in their assessment of the outlook. This is reflected in the responses to the question about the timing of the improvement in conditions in ‘your market’ which is spread out fairly evenly over the course of the next couple of years and beyond.
Two thirds of our survey respondents reported increased business innovations in response to the impact of COVID-19.
Looking forward, the main challenges over the next 12-24 months were cited as:
- securing new business
- maintaining social distancing on site
- restoring investor confidence
- shrinking of occupier demand
- future of the high street
- retention of supply chain
- contractual claims and disputes
Through our COVID-19 survey of the profession, as well as seeking market insight and an indicator of market confidence, we also asked our members how RICS can provide support during the pandemic and the subsequent reopening of markets. Support was requested on the provision of PII insurance, resolution of disputes, guidance on valuation and opening of the residential and commercial property markets and construction sites in addition to work with government to aid the sector during the recovery – especially SMEs.
To improve availability and affordability of Professional Indemnity Insurance at this challenging time, we have worked closely with regulated firms and the insurance industry on a number of changes to our requirements, in addition to providing guidance on how to approach insurers and brokers.
Guidance for the profession has been issued on dispute resolution and many other aspects restarting operations after lockdown. Specific guidance and support is available for Small Businesses during this challenging time.
We have made it a priority to focus on developing a clear pathway for all our sectors to move out of lockdown and start resuming activity once again. This was most noticeably achieved in the residential sector where RICS worked with MHCLG to restart the housing market and provide government and industry backed Guidance for home moving.
That guidance has been used as a template for similar advice in the commercial sector with RICS providing leadership to the MHCLG Code of Practice for the commercial property sector on how buildings can be safely reopened and core activities from site visits and inspections to valuations can be undertaken safely and securely.
As part of our support to our professionals working in valuation a new RICS webpage hub and resources regarding Material Valuation Uncertainty launched in May providing guidance for members to reflect current advice due to fast changing requirements. Recommendations include valuation approaches and evidence during the COVID-19 crisis with a focus on financial reporting and measures for the accurate and consistent reporting of material uncertainty covering a wide range of asset classes and specialisms to inform a consistent market approach.
In the construction sector RICS’ joint professional body letters to Devolved Nation Construction Ministers were well received by industry stakeholders as was our building of consensus with the Department for Business, Energy and Industrial Strategy (BEIS) on the construction and infrastructure sectors and our work with the CLC and the profession to present to government a list of construction stimulus measures and assessment of the likely post-virus effects on tender prices and costs can to aid the economic recovery post-virus.
Our work with government continues relentlessly with RICS meeting (virtually) with Ministers and senior officials every day of the working week with a focus not just on Westminster but on the whole of the UK, with an active programme of engagement with the administrations in Edinburgh, Belfast and Cardiff. In all three nations we are influencing the reimagining of our sectors in the post Covid-19 world.
Further information on our ongoing government advocacy activity can be found here.
Kindly shared by Royal Institution of Chartered Surveyors (RICS)
Main article photo courtesy of Pixabay