My World: June 2021…
This is part of a series of articles where our contributors describe how they think things will look a year from now.
As coronavirus becomes endemic, life will never be the same. For property, it’s about repurposing assets to reflect those changes
It is now 18 months since we first heard the word coronavirus’. Looking back, it seems impossible to imagine that at one stage we believed the world would return to a pre-pandemic norm. Not for the first time, mean-reversion advocates have been forced to revise their assumptions. Benoit Mandelbrot is now regarded as a visionary, and his classic text The (Mis)Behaviour of Markets: A Fractal View of Risk, Ruin and Reward is required reading on finance courses, which now all feature chaos theory as a module.
Looking back, how did we get here, and how much was predictable?
The starting point is why we never escaped the clutch of covid to return to our pre-2020 state. There were attempts, of course, but every time the final barriers were brought down there were reports of another possible pandemic and restrictions were quickly reimposed. No politician wants to be accused again of ignoring the warning signs of covid-N+1. Some restrictions on freedom of movement for the benefit of the greater good are now regarded as an acceptable price to pay.
So, what is the new normal for real estate?
Offices: In terms of working practices, very few people who used to work in an office now go in five days a week. Staff work on a rota/quota system. Ironically, this hasn’t reduced the demand for office space as much as expected, since instead of hot-desking staff are allocated their own desk to reduce the risk of transmission.
Transport: As a result of the restrictions and the increase in flexible working, those who do commute report that the journey on the recently renationalised rail network is far more civilised than pre-2020.The reduction in passenger journeys combined with social distancing requirements made the franchises no longer economically viable, so the government took ownership as part of its emergency Infrastructure Bill.
Alternative uses: The other major change has been the swift response of the real estate industry to repurpose assets to reflect the change in demand. Whereas larger shopping centres were previously looking just to swap out department stores, the revised plans now are for wholesale use change – with science parks or medical testing labs preferred. This is looked on very favourably by the government, and planning restrictions are being reduced significantly.
Similarly, a number of budget hotels and secondary student accommodation blocks are no longer seen as fit for purpose and the owners are seeking
My predictions for June 2021:
UK in recession: Yes
Sterling vs US dollar: Lower
Sterling vs euro: Lower