7 Ways Covid-19 Will Shape the Real Estate Industry
Which Potential New Trends May Emerge From the Coronacrisis?
Aside from interest rate developments, inflation, or property prices — what will the post-corona construction and real estate sector look like?
Disrupted production and supply chains, expansive monetary policies, and the predicted collapse of the global economy — the effects of the corona crisis will accompany us for a long time to come. Forecasts range from total isolation through the decomposition of global systems to a return to traditional values and local structures. Whatever direction the world will move towards, the construction and real estate industry will have to deal with a variety of new trends and changes in collective behavior. Let’s have a look at potential scenarios and probable developments.
[The real estate industry] can help reduce the risks of future pandemics by limiting the possibilities of spreading contagious germs as well as by optimizing living and working spaces to increase the physical and mental wellbeing of people.
1 The move towards a more digital environment is probably the most obvious change. After weeks or even months of social distancing and working from home, the building sector has finally caught up with the risks involved when refusing to apply more transparent, data-based working models. Up until the lockdown, digital building measures, and maintenance methods such as BIM (Building Information Modeling) or LCDM (Life Cycle Data Management) were tolerated with little more than a nice-to-have attitude if any at all. It is only amid this pandemic that traditionalists are truly forced to move into digital spheres if they don’t want to risk a standstill on construction sites.
Digitalization is not a new trend, of course. Back in 2016, the McKinsey Global Institute (MGI) already reported, that construction is among the least digitized sectors in the world, coming second to last in the United States and at the very end of the index in Europe. The sector has taken steps towards the digital transformation since then (mainly by discussing digital strategies or by implementing PropTech solutions originating from players outside of the industry) but still moves along at a glacial pace.
2 The infectious character of Covid-19 increases the individual and collective awareness of hygiene and thus enforces a sense of responsibility towards society and our immediate surroundings. The pandemic has caused many corporations to invoke their duty to protect their staff and thus prioritize health protection over turnover. This goes to show the severeness of the fear to infect others. It is therefore to be expected that hygiene and physical health will become a focal point in society and politics. Similar to what we experience with sustainability issues, health and sanitary protection is likely to gain importance in aspects of corporate image and will revolve around the workspace.
In this context, infrastructure and operations management becomes increasingly important for building investors, portfolio managers, and corporate real estate owners. For example, in response to the outbreak of SARS in China, lifts and break rooms in industrial plants are still regularly covered with foil and disinfected once a week. The increased use of robotic applications to assist in the cleaning or disinfection of public spaces, office buildings, shopping centers or medical facilities is also very possible.
3 Furthermore, improvements in building standards are conceivable in regions that have placed less emphasis on regulations in this area so far. The South China Morning Post, for example, writes that the outbreak of the virus proves the necessity to construct buildings according to new security standards such as scalable ventilation and filter systems. Tenants will increasingly seek such arrangements to protect themselves or provide a safe and healthy workplace for employees.
4 New hygiene requirements can further advance technological development. For example, the Internet of Things (IoT) is likely to become increasingly involved in sanitary and health monitoring mechanisms. Public buildings may soon require sensors for infrared scans to monitor the temperature of people entering a certain space or measure the concentration of carbon dioxide in indoor air to reduce the general risk of infection.
5 Rather sooner than later, innovations and new technologies are to be expected in the field of surfaces and materials and may very well be created in unexpected places. So far, self-cleaning surfaces are primarily used in hospitals, laboratories, and F&B. Recently, the start-up of American chocolate manufacturer Hershey has started to focus its attention on the building industry. AIONX produces adhesive covers that are powered by electricity. As soon as something touches the surface, it releases copper and silver ions which, according to the manufacturer, kill up to 97% of bacteria, fungi, or — you guessed it — viruses. Nanoseptic Surface Films are based on a similar principle, using ambient light to render viruses harmless.
6 The pandemic sheds new light on the challenges of urbanization and the associated density. On the one hand, quarantine increases existing risk factors, and the lack of (personal) space further aggravates social tensions. On the other hand, physical distance is the most effective measure against contagion. In the future, the relationship between density stress and healthy living spaces will certainly be challenged and thus create new requirements for urban development as well as area and spatial planning. In regards to the square meters per person, the American urban sociologist Richard Sennett, for example, suggests designing future cities in the sense of an accordion, so that the inhabitants can physically expand or retreat as needed.
To illustrate his idea, let me introduce a recent use case in Switzerland. At the beginning of May, various initiatives of neighborhood associations have demonstrated the need for flexibility in the city of Lucerne. Since all borders have been closed, there are no buses or tour operators on certain squares to drop off or pick up tourists, leaving plenty of space unused. The association approached the city council with the request to temporarily convert these areas into meeting points for locals to enable physically distant gatherings. Similar demands have been made by representatives of catering and gastronomy businesses all over Europe. To comply with the two-meter distance rule that prevails in many countries, restaurants have to be able to use public outdoor spaces including streets and parking lots.
7 Changes in outdoor planning are apparent, but Covid-19 implies modifications in the way we utilize the space inside buildings as well. Architecture may shift from putting economic efficiency maximization at the center of attention to instead focus on humanitarian security maximization. As a result, today’s common models such as the open floor plan or remote desk solutions may soon be called into question. Furthermore, balconies and terraces could be gaining relevance in the home design. In times of self-isolation, it has become certain how important they are for the well-being of most people.
As we anticipate changes in the way we construct, design, and maintain post-corona buildings, the real estate industry must assume its responsibility: We can help reduce the risks of future pandemics by limiting the possibilities of spreading contagious germs as well as optimizing living and working spaces to increase the physical and mental wellbeing of people. To do so, we must predict emerging technologies, research changes in relevant trends, and constantly push forward with new developments.
The Corona crisis proves that innovation, agility, and creativity are typically applied when we are forced to leave our comfort zone. It has once again become clear, that necessity is the mother of invention and over the last couple of months, we have seen much of it: perfume manufacturers produce disinfectants, automobile manufacturers create respirators or textile companies manufacture face masks.
At last, some good news. Despite the shifts in society and current uncertainty, our hands are by no means tied: crises are always an opportunity to break new ground. “Crises, especially pandemics, often have paradoxical effects — trauma can turn into new beginnings, fear into creativity,” writes the German Future Institute. The Swiss hotel industry has already proven this shortly after the borders were closed when it made short-term changes to its arrangements and offered its premises to stranded tenants for temporary use at favorable rates and enabled offices to book rooms on hourly bases to secure physical distance amongst employees.
At this point, one of my favorite quotes from Winston Churchill seems appropriate: “Never waste a good crisis.” And we shouldn’t.
A shortened version of this article appeared in German in the newsletter of the Swiss Chamber of Real Estate Brokers.
