Occupiers are already preparing to go back to work as the immediate shock of country-wide lockdowns and the need for rapid adaption subsides, according to a new report from JLL.
There is limited visibility on the timing of re-entry into the workplace, but the agent said many companies are exploring how they will need to restructure, including the redesigning and fit-out of workplaces to enable employees to return.
Offices
In the office sector, JLL expects significant consolidation across the flexible office industry as a result of the Covid-19 pandemic, although in the medium to long term demand for this type of space is forecast to continue as many firms are expected to be unwilling to commit to big capex projects or make any firm employee headcount predictions.
Many corporate companies are exploring ways to future-proof their offices, with de-densification likely to take place and some may look to remote working to compress their real estate footprint.
Retail and leisure
Meanwhile, a rising number of retailers and leisure operators, although in the short term primarily concerned with preserving cash, are investigating how to offset the loss of revenue from their physical store portfolios.
For example, some gym operators are offering subscription services to stream online workout sessions, while high-end restaurants are offering meals for delivery or collection, JLL said.
Staying relevant is crucial for these sectors, as is the need to be seen to be socially responsible by customers. Various firms, such as luxury retailing behemoth LVMH, have converted their manufacturing facilities to produce items such as hand sanitiser and face masks.
Covid-19 will also accelerate the restructuring of retail, with greater emphasis placed on having a flexible omni-channel model.
Some upmarket retailers are examining their options to accelerate the opening of outlet stores after the pandemic subsides as a means of clearing surplus stock, JLL said.
Logistics
The ongoing changes in the retail sector will also further impact the logistics sector.
The pandemic is highlighting the importance of supply chains and logistics real estate, and JLL expects to see a renewed emphasis on the domestic supply chain as risk mitigation and resilience becomes a key focus for firms.
This will lead to a greater diversification of transport used to move supply around and a move to be less reliant on any single country for production and distribution purposes, culminating in increased regional demand.
Hospitality
For the hospitality sector, which has come to a complete halt, it is anticipated that people will look more to domestic, driveable locations for their holidays, with professionally run lodgings having a greater appeal due to enforceable hygiene standards compared with alternative accommodation, which could face increasing scrutiny.
Investment
Despite the anticipated structural changes ahead, there is still a record level of US$330bn (£299bn) available to be invested in global real estate, according to JLL.
But in the near term, the agent expects real estate investors, in assessing potential assets, to take into consideration several key factors, including income stability, which favours living and office property that has credit tenancies, lower exposure to variable rent and strong remaining lease terms.
Operation criticality will also be a consideration for investors as the more important the facility and tenancy to revenue and operations, the lower the risk, putting a favourable spotlight on data centres and logistics assets.
In addition, occupational density will become a key consideration for investors as the higher the density of occupation, the more there will be a risk of disease spreading.
Overall, what is clear is that businesses will not go back to looking and feeling like they did before Covid-19, with the workplace becoming a “liquid and distributed ecosystem model” and new behaviours adopted, JLL said.
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