EG Interviews: Pandemic lessons from real estate’s leaders

Since the onset of the UK’s first Covid-19 lockdown back in March 2020, EG has sat down – sometimes in person, sometimes over a video call – with more than 100 leaders from all parts of the built environment in our weekly EG Interview. Those interviews have not always centred on the pandemic. But regardless of whether the discussion was around deals, business strategies, management styles, market conditions or any other topic, coronavirus coloured the conversation. Investors, advisers, occupiers, politicians – all have had to think on their feet and respond to a rapidly changing environment, and many shared their lessons with our readers. There were upsides, expected and unexpected. Shravan Joshi, chair of the City of London’s planning committee, spoke of the “democratisation” of committee meetings when streamed on YouTube. Smart Spaces chief executive Dan Drogman said resistance to the company’s software for making buildings more efficient “just melted away” as businesses rethought their real estate. Canary Wharf boss Shobi Khan hailed the fact that the pandemic “put a spotlight on health and wellbeing” in the built environment. But more often than not, the focus was on overcoming struggles, adapting to volatile markets and working hard to communicate real estate’s offering clearly and concisely – not least to government. Here, two and a half years on from that first lockdown, we revisit conversations with some of real estate’s biggest names to draw out the themes that dominated their to-do lists during a crisis unlike any other – and which will shape deals and developments for years to come. ‘Light at the end of the tunnel’ No one in the workplace has had an easy ride during the pandemic. Company leaders, for their part, have had their management styles and strategies tested as their businesses pivoted to remote working and employees looked to them for guidance as to how the coming months and years would pan out.  The more – how shall we put it? – seasoned veterans have been able to draw on experiences of crises past. Take JLL-er Andy Poppink, who at the start of 2021 moved from California to Europe to become the agency’s regional chief executive for the markets business. Covid-19 marked the former professional basketball player’s third crisis since joining Staubach Company, which JLL bought in 2008. He started his real estate career as the dotcom bubble burst, then worked through global financial crisis.  “To some extent, I think starting at a low point in the market when things don’t come as easily as they might during a rapidly growing marketplace allows you to build skills and a foundation that sets you up for future success,” he told EG in the summer of 2021. “Talking through this with people, you realise that with the growth of the millennial generation as a higher percentage of our workforce, most of our JLL team had never been through a crisis. The majority of our people have only known a 10-year, expansionary real estate cycle where people are growing, money is flowing.” Poppink’s advice? Keep on keeping on. “There is light at the end of the tunnel,” he said. “It doesn’t feel like it when you’re in it. It didn’t feel like it when in the depths of the dotcom crash. It didn’t feel like it in 2009 in the global financial crisis. But we are resilient people. So to stick with it, and be resilient and patient, will pay off for a lot of our people.” PGIM Real Estate’s London-based chief executive Eric Adler felt the same. Months into the lockdowns of 2020, Adler told EG that younger industry professionals should be cautious but excited about the opportunity the coronavirus crisis presented. “This will be a real accelerator for your career experience,” Adler said when asked what advice he had for younger team members. “When I think of the lessons that marked me most, that I carry with me to this day, they weren’t in buying a building and watching the cap rate compress or rents go up. They were always when something went wrong. “This is a time when [junior professionals] are learning more than they realise because they’re seeing how to handle this uncertainty. They’re seeing how to contingency plan for the fact that certain asset classes, certain tenant bases are really going through distress. They’re also seeing the need for increased transparency of information to our client base.” ‘It was in our gift’ Real estate’s role in combating the pandemic was crucial, and companies reacted quickly. Soon after the first 2020 lockdown was ordered, Phil Kemp, then-chief executive of Bruntwood SciTech, found himself and colleagues in a race against time to repurpose existing space at its Alderley Park life sciences campus in Cheshire into one of three national hubs dedicated to investigating Covid-19. They made it look easy. Within just three weeks, two floors in one of the campus’s buildings were turned into testing facilities, handling up to 50,000 live samples each day.  “It’s been a challenge, but it’s been very exciting,” Kemp said that summer. “The Army has been delivering quite a lot of equipment, and it’s been quite a broad group of people working on this in the national interest.” Equally on the ball was NHS Property Services, the UK’s largest owner of NHS real estate. Chief executive Martin Steele recounted the company’s fast hunt for 41 sites with capacity for around 1,400 new intensive care beds as the pandemic unfolded, including out-of-action locations and other space that could be freed up by working with local NHS trusts.  “Everything we could lay our hands on, we would convert,” Steele said. “Rather than waiting for a grand plan, we knew it was in our gift to do it, and we took a decision.” ‘We will all miss connecting’ One of the most long-running and impassioned real estate debates to come from Covid has been over the future of the office. Will companies want big offices if they know staff can work effectively from home? Will staff want to come into the office if they have the choice? What is lost when workers only collaborate through Zoom or Teams? And given all this uncertainty, who the heck wants to invest in offices now? There have been no easy answers but plenty of views – and plenty of shifting opinions. Early in the pandemic, Boudewijn Ruitenburg, chief operating officer of Dutch developer EDGE, spoke with EG about the company’s planned scheme at London Bridge. It could be a post-pandemic blueprint for offices after Covid, he hoped; one that prioritised sustainability and the wellbeing of occupants in ways that might have been less pronounced just months before. “These trying times make the importance of healthier and more sustainable buildings even clearer,” Ruitenburg said. “What we want to achieve is all about air quality and health. In so many traditional buildings these things are just not good enough. So there is a lot we can do to improve on that.”  And what about occupancy? Even then, Ruitenburg wasn’t one for seeing a remote future. “I think we will all miss our colleagues and connecting and sharing ideas,” he said, just weeks into the first lockdown. “People will want to return to that to a degree, but perhaps we will change our behaviour as well. Maybe we will spend a little bit less time at the office, go in later in the morning and use the space in a different way.” Ruitenburg couldn’t have known how long companies would be waiting to welcome staff back. More than a year later, in mid-2021, Mayfair Capital chief executive Giles King reflected on a new remote-working policy that he was introducing alongside an initiative named Mayfair Reunited; a month in which staff were encouraged to come into the office for at least four days a week to bond as a team and to allow members of staff hired during the pandemic to meet their new colleagues properly.  “The more junior employees that we have learn so much more when they’re around their more experienced colleagues,” King said . “That mentoring that they get and physically participating in meetings, you can’t beat… Some of the sparks that you get from interacting physically and driving the business – maybe a new business idea – I think is harder to do remotely.” Many operators of flexible office space believe their sub-sector of the market has found its true calling during a crisis in which companies needed offices that could adapt to fast-changing needs.  “The bottom line is Covid has accelerated the demand for flexible space and that is driven off how precious capital is for corporate businesses,” Convene’s Elliott Sparsis said. “They want to preserve as much capital as they possibly can. So if they can move in and buy their real estate off the shelf from a flexible provider then that mitigates the need for them to have to invest massive sums of capital in rent deposits, fit-out, design.” ‘An exemplar for regeneration’ The pandemic has also driven new conversations about how our towns and cities more broadly should be designed and run. For Rachael Robathan, then-leader of Westminster City Council, the crisis encouraged a wide-ranging rethink of the built environment to support local companies.  Temporary measures included wider pavements and 11km of new cycleways to encourage people to return to the streets and shop, ready for the reopening of the economy. “It was very clear that until people felt comfortable that they could move around the pavements safely, they weren’t going back to shop on Regent Street or Oxford Street and we need those streets to come back to life,” she told EG in the summer of 2020. “We need them to be able to open.”  Robathan added: “We’ve accepted that some things will work much better than others, but the point about it being a temporary strategy is that we can amend things. If something isn’t working or it’s having an unintended consequence of throwing traffic down residential roads, we can say ‘we’ll change this’.” In Manchester, Louise Wyman, then the council’s new strategic director of growth and development, argued that lockdown had underscored the importance of public realm in cities and encouraged pedestrianisation. “We’re going to need space where our communities can be outside more easily, both for recreational [purposes], but also for transacting,” Wyman said, adding that she wanted the city’s outside spaces to operate more like “urban living rooms” and for businesses to have greater flexibility to operate outside more. Meanwhile, Manchester mayor Andy Burnham made no secret of his belief that real estate should be working harder to bring people back together once restrictions were lifted. “I think people crave the physical experience of being in a shop. They crave meetings in an office. People are going to want to come into towns and cities,” Burnham said. “The issue is they’re going to have to be better-planned, more attractive places to be than perhaps they are. There will have to be some rethinking of that – how can you make these places a destination that people will want to go to?” That takes teamwork like that of the Stockport Mayoral Development Corporation, he added. “As long as we can bring the industry with us, you can see that as an exemplar for regeneration. Not the government mandating its own development corporation and bypassing local councils – one that does it bottom-up with really strong support from all the players in the locality. I think Stockport could create a template for how a British town could move from a 20th century situation to a completely new future.” ‘We took a real hit’ Public and private sector co-operation was sorely lacking for much of the crisis. Many real estate leaders felt ignored by the government – or, worse, as though their businesses were viewed as not needing support. Rent moratoriums that allowed occupiers to avoid paying rent without fear of legal action were seen as favouring tenants at the expense of landlords – themselves struggling. Real estate took “a real hit”, said Grainger chief executive Helen Gordon. “Now, to build back better and to help the country’s productivity, it needs government to support it. I think they have to think about how investment, not only post-Covid but post-Brexit, is going to be sorted out by the real estate industry.” When Argent’s David Partridge took the chair of the British Property Federation in the summer of 2020, he expressed hope that the government was starting to listen to the industry. “It got off to a bad start,” he said. “The retailers and hospitality industry jumped in first. Quite right – they were the guys who were suffering on day one. No pubs, no restaurants, no shops. So there was a swing with a moratorium on statutory instruments that went one way. That has swung back now, over time, as government has realised that while there were a few high-profile people who were perhaps not behaving correctly, most of the property industry, and certainly the really big responsible investors and landlords, were acting in a pragmatic and sensible way.” He added: “None of us want empty offices or shops because it doesn’t help us. And so if we can support businesses to get back on their feet, then that’s got to be the best thing for us in the future as well.” Earlier this year, as Liz Peace retired as president of the Property Litigation Association, she reflected on the importance of dialogue between real estate and the government, not least over pandemic rent arrears.   “This was an unfortunate episode for the property industry,” Peace said. “I think people like the BPF and the PLA tried very hard to explain the ramifications of what the government was doing, but the problem was that the government [and] the press tended to focus on the impact on the occupiers: ‘We must save their businesses’. But this is part of this fundamental misunderstanding. Owning and managing real estate is also a business. If you mess it up, an awful lot of people will suffer, including investors, pension funds and the like, on which we all depend.”   To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews Photo: Andy Burnham © Joel Goodman/Lnp/Shutterstock