Coronavirus: Looking beyond the pandemic
JLL states the pandemic will prompt a rethink in urban design, increasing the imperative to develop truly scalable smart city solutions
According to the COVID-19 global report from JLL, the coronavirus pandemic arrived during a period of faltering global growth, elevated geopolitical risk, and an intensifying pushback against globalisation. The crisis has likely pushed global economic growth to an abrupt halt in Q1, it stated.
JLL’s paper on Global Real Estate Implications suggested that strong involuntary measures implemented to combat the coronavirus outbreak, plus voluntary reductions in economic activity, have severely impaired economic activity.
However, certain structural trends which have been shaping the world over the past few decades are expected to emerge and will become part of the ‘new normal’. Some of the ‘mega trends’ impacting the real estate sector are the growth of corporate outsourcing; rising capital allocations to real estate; rapid urbanisation and city building; the adoption of new technologies; and the imperative to build a more sustainable future and to take urgent action to combat climate change.
Going into detail, JLL said growth in corporate outsourcing will accelerate over the long-term due to the ongoing health crisis. Occupiers will increasingly seek third-party real estate services to sustain business continuity. There will be increased demand for new workplace design, including more digital, flexible, and health-oriented working solutions.
Additionally, the low interest rate environment and financial asset price volatility will support the case for portfolio diversification. ‘Flight to safety’ in real estate, which continues to offer better relative returns in comparison to other asset classes, looks likely to increase, added JLL.
Meanwhile, the pandemic is unlikely to slow the long-term trend in growing urbanisation, but will prompt a rethink in urban design, increasing the imperative to develop truly scalable smart city solutions. This will put a much greater focus on public health and safety, and to deliver greater investment in public infrastructure, JLL noted.
Another given trend is the mass adoption of remote-working technology through the pandemic phase. JLL’s report stated that will likely increase the pace of the Fourth Industrial Revolution, including even more emphasis on robotics, the Internet of Things (IoT), Big Data, and unmanned vehicles. On the other hand, there will be an increased spotlight on corporate social responsibility, and through this, greater awareness of the fragility of our society and ecosystem.
JLL added that this ‘new normal’ will take time to evolve while new trends are already starting to take shape, which include governments, businesses and communities beginning to adjust to the post-pandemic environment.
Meanwhile, Dana Salbak, head of Research MENA at JLL said that by offering and promoting good quality investment opportunities in other asset classes that are less prone to cyclical market behaviour, the regional real estate industry can be better prepared for such pandemics in the future.
“These include warehouse & logistics, education and healthcare. Currently these sectors (particularly the warehousing and logistics) is heavily controlled and managed by government entities with little room for private players and institutional investors. Also a focus on Grade A spaces, particularly in the commercial market, since currently the majority of stock is Grade B, lower quality & strata-owned, which do not typically appeal to the more mature global institutional investors.”
“By creating these spaces and offering them up for global investors you (as a country) are diversifying your investor base, and also diversifying your assets which make you less prone to volatiles in real estate performance,” she concluded.
