COVID-19 – The year that changed everything… and a view to 2021

By Kate Peers-McQueen

 

What a year 2020 promised to be… then came Covid-19! With things really building up and looking positive in the property and construction markets, post-Brexit issues, and then the fast and unexpected approach of Covid-19 changed everything as we knew it. What happened during lockdown and the apparent shutdown of the UK, as well as the rest of the world, to kill the virus had an abundance of results – positive and negative. Instant reactions from the UK government included the creation of the Furlough scheme to save millions of jobs of those unable to work from home; extending key-worker status to a variety of service-providers; the swift creation of the Nightingale hospitals and testing centres; as well as relaxing the Planning rules so pubs and restaurants could operate as takeaways and later on “Eat Out to Help Out”. While some learnt new trades and hobbies, spending much needed time with families and children, completed DIY projects and/or continued to work full time from home, others were made redundant, or suffered through issues with cabin-fever and mental health struggles among many. We saw the best of people in society through volunteering efforts – with many helping to shop and care for elderly and those shielding, raising money for charity and the NHS, and Clapping for Our Carers.

 

Government figures show that the UK economy, and the property market specifically, took a nosedive by nearly 2% in May and further in the resulting months, affecting many property service entities and property developers.

 

While the labelling of construction workers as a key worker was up for debate, many were permitted to continue working, with their efforts deemed as essential for the economy to stay stable – providing health and safety measures were in place including social distancing. Project starts in civil engineering fell by 34% in April, according to Glenigan, and continued throughout the year, compared to the same period last year. Within main and sub-contractors, as expected, many have seen a downturn, as much as 50% (with one of CCO’s client going from £600 down to £300m in one financial year due to Covid-19), the majority fell between the 15% to 25% downturn in both turnover & profits. According to government figures, in England the number of dwellings completed was 15,950 in April to June 2020 – which is a 62% decrease compared to the last quarter.

 

In the agency and consultancy markets, many professionals involved in the industry have been forced to stop working creating a downturn of need for the services offered. Surveyors are an integral part of the valuation, acquisition, and disposal process of varying asset classes. With the introduction of lockdown and services effectively rendered, it caused large loss of revenue for several firms and it is widely known of several redundancies across the board with all sizes of practice, in turn hampering all recruitment and growth plans for 2020/21. Office lettings in London dropped off 57% in the second quarter of this year compared to the previous quarter, according to research by DeVono Cresa.

 

In terms of investment into the UK real estate market, the total invested in the first six months of 2020 plunged 16% when compared to the same period in 2019, however, a poll conducted by the City of London Corporation has revealed that 99% of global investors are still keen to invest in London, with 79% actively doing so. Savills latest research report has ranked London as the most resilient investment market out of Europe during Covid-19 – so things are definitely looking brighter!

  

WHAT HAS BEEN DONE?

 

With the evolution of business practices including working from home, the constant use of video conferencing such as Microsoft Teams and Zoom, social distancing tags within construction and engineering, the “new normal” seemingly has worked – with a lot more efficiency in place, and a healthier work-life balance for some – wasting less time commuting to offices or sites. Arguably, more meetings have taken place, and less need for travel and a positive impact on the environment through less driving, although this has been counter-balanced with many fearing the use of public transport. Specific industries within property have adapted even further – with surveyors offering desktop valuations’ and virtual surveys, as well as sales/lettings negotiators and new homes professionals offering virtual 360 tours, through new and existing software systems – facilitating the sales and lettings industry to keep making sales.

 

With numerous new programmes, promises and relaxed laws – much has been done to save the country from further economic downturn, and get more people back into work. This has included the stamp duty holiday – which has resulted in house prices rise at their fastest rate for five years, accelerating to 5.8%, according to Nationwide. Boris’s “Build Build Build” programme announced in June, has laid out numerous plans to boost the property and construction industries, including: more flexibility on repurposing commercial buildings through a change in the Use Classes Order and adapted PD rights for commercial buildings as well as residential property owners. Homes England has gone on a substantial hiring effort through 2020 – as part of the PM pushing to develop government owned land. Packages of grants and programmes across the industry to boost growth have included: a £12bn affordable homes programme that will support up to 180,000 new affordable homes for ownership and rent over the next 8 years – including 1,500 unit pilot of ‘First Homes’: houses that will be sold to first time buyers at a 30% discount; funds from the £400m Brownfield Land Fund have been allocated to the West Midlands, Greater Manchester, West Yorkshire, Liverpool City Region, Sheffield City Region, and North of Tyne and Tees Valley to support around 24,000 homes; and the HBF seeks to help SME developers with access to finance for new housing developments – to receive additional £450m boost.

 

The key thing that has come out of 2020 in terms of survival – regarding construction and property firms, and candidates finding new roles again and successfully working from home has been adaptation. The government’s changes have already resulted in some aforementioned boosts, but others we will see the results of in the coming years.

 

LOOKING TO THE FUTURE

 

With very positive news from NHS bosses saying hospitals in England expecting to receive their first deliveries of a vaccine produced by Pfizer/BioNTech as soon as Monday 7 December, with regulatory approval anticipated within days – there is a heightened sense of positivity as we look into 2021.

 

Civil engineering construction is also set to benefit from more government spending – particularly by Highways England and Network Rail – and as the water industry’s AMP 7 investment programme gets underway, a 20% rise is predicted for 2021 on previous years. Meanwhile, large infrastructure projects such as Thames Tideway, Hinkley Point and HS2 should sustain construction activity in the civils sector whilst the £1.4 billion Stonehenge Tunnel is set to start in 2021. Data shows that tenders have recently been returned on one key Highways England project set to start in the new year – a £130 million series of junction improvements on the M27 around Southampton Airport.

 

Within the housebuilder market, shares had already risen by 18% by July, and have continued to increase since then. In the housing sales market – it is set to be the busiest December in a decade, with a seasonal rise in demand in January – although is likely to level out or dip after this, Zoopla reports. The ONS has stated that construction output grew by 2.9% in the month-on-month all work series in September 2020, driven by an increase in new work (2.7%); and the construction output in September was overall only 7.3% lower than in February – while infrastructure and private new housing levels already being above their pre-pandemic level out of output. New orders grew by a record 89.2% in Quarter 3 2020 compared with Quarter 2 2020, following the record quarterly fall in Quarter 2 2020 of 54% – showing that signs of a full recovery, if not increased level

 

In other specific markets, the BPF has stated that despite the pandemic, there has been a 22% increase in BTR homes being completed, being built or in planning; the PBSA market continues to grow, albeit slower than 2019, but had 25,000 beds added to the market this year, according to StuRents. Property Week has stated that 2020 has also had the highest number of big warehouse deals on record thanks to a coronavirus-fuelled surge in e-commerce business, while data centres have had a huge boost as a direct result of the pandemic. The senior living sector has had a substantial amount of investment, with a £1.5bn forecast to be expected by the end of 2020. SEGRO CEO Andy Gulliford stated “Already growing demand has soared, fuelled by a surge in digital data to facilitate connections for businesses in a home-working environment, for video streaming, increased social media activity and downloaded content for home entertainment. Couple this with the fast-growing trend for businesses to move their IT functions into the cloud and estimates that the data centre market could grow by 15% a year between now and 2024 don’t sound unrealistic.”. With workers of the data centres themselves being classed as keyworkers as well as the logistics and manufacturing industries, the investment in, development and construction of these markets is undoubtedly going to continue to rise in 2021.

 

While the commercial and retail markets may be the longest to recover, with the OBR predicting a wipe of £230billion off the value of commercial property across the country, there have still been some positive signs, and with more innovation to come. Trends such as co-working but in hubs closer to home, or flexible contracts to offer “part time” or “roaming” seats – mean there is more change to come to adapt to the “new normal”.

 

All the above has seen a substantial increase for hiring strategies across most sectors, with many having a clearer vision for Q1 2021 in terms of requirements. We are seeing several larger firms still slow to the market whilst they deal with the fallout post redundancies, many have pipelines filling. Main and sub-contractor businesses that CCO work with are seeing the positives, with previously mentioned clients having had multiple projects awarded and forecast which secure current turnover and aim to grow at least 20% for 2021.

 

While nothing is totally clear about what will happen over the next 12 months, it is certain that there is more change to come, further re-evaluation of service offerings by consultants and surveyors moving forward, and innovation continuing to be key. It is true while this year has been devasting for all – some positives have come out of it, with some parts of an industry previously viewed by some as needing more modern practices – now forcibly adapted.

 

Currently, amidst a second wave – and coming out of a lockdown in England – things are looking better for 2021, and to quote Charles Darwin, “It is not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change”.

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