Post-Covid-19 scenarios for the real estate industry


How has the crisis hit the markets and businesses?  Tenants and landlords, which are worst affected?  Are there long term changes in the sector that will be accelerated or created by the crisis?

The panellists: 
Sabina Kalyan, CBRE Global Investors & Associate Fellow
Ronen Journo, SVP, Enterprise & Workplace, WeWork
Robert Cookson, VP, Facebook
Andrew Vaughan, CEO, Redevco

The panel was led by Professor Andrew Baum



Executives from the global real estate management industry came together with experts to discuss how Covid-19 is accelerating profound change within the sector – presenting opportunities, as well as potential risks.  

Sabina Kalyan, Global Chief Economist CBRE Global Investors; Ronen Journo, SVP, Enterprise & Workplace at WeWork; Robert Cookson, Global Head of Real Estate, Facebook; and Andrew Vaughan, CEO, Redevco – which has a multi-billion dollar portfolio of European real estate – discussed impacts of the pandemic, and how the industry should respond. The session was chaired by Professor Andrew Baum, Professor of Practice at Saïd Business School and leader of the Oxford Future of Real Estate initiative, as part of the Leadership in Extraordinary Times series. 

Kalyan said that the pandemic had triggered a "mass experiment" in remote working across the globe. Journo said that "the future of work is now here," as entire companies are being 'virtualised.' Businesses will need to use data to decide how and where employees should work, he said.  

Cookson agreed, saying that Facebook has made a long-term commitment to remote and flexible working, which could open up access to new pools of diverse talent. The company is rapidly deploying new products, and its real estate strategy will reflect that need for scaling – focusing on core needs, flexibility, and shorter leases, he said.  

Baum discussed the role of ‘social capital,’ which real estate businesses have maintained until this point, but may soon need to be rebuild to optimise business performance.  

Kalyan said that now is the time for an "existential re-think" about the role of the office – with an opportunity to redefine workspaces as places for transmitting corporate values or generate a USP. 

According to the panel, changes in how we live, work, and travel could also impact the blend of real estate in towns and cities.  

Vaughan said that in the future, workers may only go into offices two or three days per week – reducing the carbon footprint associated with commuting. The panel said this could lead to a 'suburbanisation' of work, and potential corrections to house prices - particularly in commuter areas, where values correlate with proximity to cities. 

Vaughan added that due to the pandemic, 88% of the shops managed by Redevco had been fully closed, with rents were "significantly down." His company has a policy to negotiate with each trader and offer support to independents, as well as those who are financially vulnerable. In total around 1,000 shops have now re-opened, he said. 

Journo predicted that buildings which had been left dormant during the pandemic, such as pubs and churches, could be re-purposed into flexible office spaces to regenerate smaller towns, and there may be a "mushrooming' of new coworking operators in the market.  

Kalyan said that Covid-19 could change the composition of the real estate industry, and its status as an asset class.  

She shared a CBRE report, which said the pandemic would result in a "small, permanent loss of output" in real estate, with retail, hospitality, and student housing suffering immediately. In contrast, demand for logistics and food storage real estate is likely to increase as people shift to ordering groceries online. 

Kalyan added that landlords' tax burden is likely to increase, in order to pay for the financial support which had been "quite rightly" provided by government. It would be wise to recalculate the security of cash flows, she said. 

But the panel remained optimistic. Vaughan said this is a 'massive moment' to optimise sustainability; seconded by Journo, who urged companies to rationalise their estates.