Against this backdrop, we recorded our second international webinar looking at the impact of Covid-19 on offices.
Once again, it was chaired by Rethinking Real Estate author Dror Poleg in New York and starred Antony Slumbers, speaking from Surrey, Elie Finegold in Houston, Texas, and me. We were joined from Hong Kong by Jordan Kostelac, director of proptech at JLL, APAC.
Speaking against the much-admired virtual backdrop of the art deco entrance hall of Mishcon HQ in Holborn, I gave some context on what our real estate team is currently seeing ‘in the office’. Unsurprisingly, our disputes teams and insurance experts are advising on a tsunami of Covid-19 related issues. The new Coronavirus Act, which temporarily suspended the right to forfeit leases for non-payment of rent has resulted in many tenants seeing this as a green light to withhold rent for the March quarter.
We have found that each landlord and tenant relationship has to be dealt with on its merits rather than by a blanket approach. We continue to work closely with landlord and tenant clients, advising on negotiation of rent concession agreements. These should be professionally documented to avoid unforeseen consequences such as inadvertently releasing a guarantor!
Increasingly important is the grey and developing area around insurance liability and how this interacts with lease provisions. There are also now disputes coming through around the closure of construction sites and responsibility for delays.
Many issues the panel discussed looked ahead to when we exit lockdown. Air quality in buildings will be an increasing focus for all of us. A point that the real estate sector really needs to stress is that well-designed buildings can act as ‘barriers to contamination’. I have now developed a keen interest in building filtration systems as these are going to be an important part of our Covid-19 control strategy that isn’t yet getting the attention it merits.
There are few certainties at the moment, but one thing is clear: as we exit from lockdown, air quality and sensor monitoring of occupier activity in our buildings will be of key significance both for health reasons and for ensuring that we know how our buildings are used. New and better air technology will be in great demand.
I also made the point that, speaking from a London perspective, we are going to need to work very hard as we exit from lockdown to rebuild London’s resilience, and to win back confidence in our infrastructure, services and our businesses to ensure a well-managed return to work and the resumption of tourism.
So, in my view, every way you look, collaboration and trust will be vital, whether it’s between the public and private sector, local and central government and of course landlords and their tenants. Fellow panellist Finegold echoed the point about government, pointing to the state and federal conflict in the US. He also mentioned that in Houston, construction sites are still open.
Here in the UK, we still have uncertainty, which has resulted in a large proportion of our construction sites remaining closed. New construction site safety guidance on social distancing has now been issued but does little to give the clarity needed to enable developers to get back on site. The previous guidance was issued and then withdrawn following criticism from construction industry leaders. In the absence of clear guidance, companies are having to make their own decisions in the full glare of the press. In the meantime, no further guidance appears to have come through from New York State where real estate was recently declared an essential business, but it was unclear how this would be interpreted.
An unexpected collaboration was the announcement of Apple and Google’s partnership to build technology into their mobile operating systems to allow for large-scale contact tracing. It’s good to see these rival companies working together to solve a problem that affects all of us. Here’s hoping the challenge of Covid-19 will encourage more such collaborations.
Kostelac, our guest webinar speaker, gave invaluable insights from Hong Kong. Importantly, he said that Covid-19 is not over when you think it is. He reported people returning to the office only to be hit by a second wave and further lockdown. He reported that offices were working staggered shifts and that thermal guns and masks had become a constant feature. If we are going to have to get used to wearing masks in the UK, is anyone producing personalised ones yet? I haven’t been able to locate any. Meanwhile, Finegold in Houston seems to have a wardrobe of masks for every occasion!
We discussed the need for digital access to offices and the removal of other touch points. It was suggested that flex operators may have an advantage as many already operate digital access for their members. Clearly, there will be an increased focus on cleaning and sanitisation protocols. Jordan told us that in Hong Kong it is not unusual in offices for sanitisation to take place every two hours. Also, expect to see more robots making deliveries round the office!
The upshot of the discussion was that the office will look very different in the next few years as the Covid-19 virus has served to exponentially expedite many trends that were already in train.
To listen to the webinar in full, please download here.
As I mentioned in the webinar, although not strictly office related, I was heartened by press reports that luxury retailer Hermes had taken an impressive $2.7m in just one day when it reopened one of its stores in China! It is good to see a strong rebound in luxury consumption, which some were quick to describe as ‘revenge spending’! It remains to be seen whether this trend will continue.
Finally, I have always wondered why I was made to study The Plague by Albert Camus at school. I now realise that this was prescient and designed to equip me to cope with the current crisis. It must be time for a reread as the only thing I remember is a quote about how one can make time go more slowly. The answer of course was to spend days in a dentist’s waiting room on an uncomfortable chair, live on one’s balcony on a Sunday afternoon, listen to lectures in a language that you don’t understand and choose the most convoluted and least convenient routes on public transport (and travel standing up).
This is for the first time starting to make a lot of sense.
Susan Freeman is a partner at Mishcon de Reya