Real estate faces fundamental challenges in a post-lockdown world

In 1969 the psychiatrist Elizabeth Kubler-Ross identified five stages of dealing with grief. It begins with denial and then gradually transmutes through anger, bargaining, depression and then acceptance. Everyone varies in exactly how they come through this, but the pattern is broadly the same. There’s a similar process in how we are responding to the Covid-19 pandemic. I was one of those who initially couldn’t see why this should impact in the way it has. Yet in the last six weeks I – and many others – have come to realise not only the gravity and scope of the problem, but also that it’s going to shape much of the next decade – politically, socially and economically. I think the first key realisation is that we aren’t going to return to ‘normal’, or life as we knew it before the lockdown. The next regulated phase will probably last longer than the lockdown, albeit in different stages. There will be greater freedoms and increased social and economic activity, but it will be conditional. We are going to hear a lot about ‘safe’ places at work, on the high street and when travelling. In particular, accommodating social distancing is going to shape thousands of business decisions in the coming months and potentially years. Some won’t cope, perhaps because of the buildings they occupy. However, many businesses will reinvent themselves, having realised that the old business model won’t work. To quote famed management consultant Peter Drucker, the greatest danger in times of turbulence is not turbulence itself, but to act with yesterday’s logic. Mind the gap Second, there’s going to be problem with mass public transport. It’s unclear how buses or urban transport systems will be able to work in practice during this second phase.  Trains between places where ticketing can be enforced is manageable. However, buses, trams and London’s Underground are ‘turn up and go’. This won’t work and isn’t financially viable.  While more people will now consider walking or cycling, the risk is that many will drive, creating more congestion in our cities, certainly in the early stages. Third, people have come to really value their local businesses, amenities and community. This will lessen when we can travel more, but I think it will remain one of the lasting changes of this period.  Talking to people from around the country, it’s been very noticeable how people who have previously not engaged locally have become far more concerned about their neighbourhood. As we work more frequently at home, these ties will remain. Embrace the change The real estate sector faces some fundamental challenges in a post-lockdown world. At one level these are about adapting to the short-term rules – for example, making our workplaces compliant and safe. Equally, some older habits will have to change – from in-person signatures on property documents, to certain valuation rules and practices.  The sector also has a fight on its hands over the ‘rent holidays’ given to commercial tenants. Politicians and commentators will need to be shown the full impact of this policy which, like cancelling share dividends, will hit the public’s pensions and savings.   Yet in many ways this crisis has highlighted the need to accelerate trends that were already evident before we ever heard of Covid-19. Town and city centres needing to reinvent themselves; redesigning offices to accommodate flexible working habits; mixed use asset classes growing in importance; and investors demanding that our built environment is truly sustainable. Moving from denial to acceptance isn’t going to be easy, but I detect that many of the sector’s leaders are ready to embrace the change. Mark Prisk is former housing and construction minister and MP