The impact of COVID 19 in today’s business world has been incredibly tangible, with dozens of companies failing and with unstable investment routes taking over procedures which are well known for being stable and reliable for steady incomes. The real estate sector has been one of the few which were heavily hit by the pandemic, especially given the fact that a lot of people have decided to step away from buying properties. Let’s analyse what may happen to the real estate sector in a post COVID world.
According to lexology “The pandemic has placed great pressure on tenants to pay their rent when it becomes due and many have not been able to do so at all or entered into a variety of arrangements with their landlords. In our experience, it is uncommon (but not unprecedented) for leases to define a Force Majeure to include a pandemic or outbreak of deadly disease, which could excuse one or both parties from performance or seek delay of their contractual obligations. The same sentiment applies to development agreements. Future legal agreements for real estate transactions may see pandemics specifically captured by Force Majeure clauses. Alternatively, agreed arrangements to delay or provide some other flexibility to a transaction might be addressed in bespoke clauses in agreements, much in the same way as bespoke ‘Brexit’ clauses were included in real estate contracts leading up to the UK referendum.” This is a clear statement for companies that focus on commercial property for sale or commercial property management.
Commercial Development At Risk
With very little warning and time to plan, many organisations have quickly adapted to the new working environment and seen its advantages. More organisations with agile working practices will become prevalent after the pandemic subsides due to cost savings from reduced space requirements, proven productivity increases and improved well-being for staff with less travel, better family/work balance and probably less time lost with colds and other diseases. This entails challenges to make offices and workspaces safe and adaptable in their design, operations and staff arrangements to ensure such flexibility. Commercial development might be compromised in big cities, especially in the US, where the costs are extremely high.
The world of real estate is definitely moving towards a severe number of changes, which will mostly take place in the next couple of years. 2021 will be a groundbreaking year for the industry, which will be forced into a strong and thorough digitalisation and approach to fintech.