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Doors opening or closing for the property sector? (Pexels)

Those in the property sector ought to have heeded the lessons of the 2008 global financial crash, plus invested in technology

Property in the United Kingdom is arguably the sector worst-hit by the Coronavirus pandemic. Approximately 450,000 property transactions – worth an estimated £100 billion – have been left in limbo since the start of the lockdown, so said the Government’s Housing Secretary Robert Jenrick on May 15.

Indeed, The Begbies Traynor Red Flag Alert for Q1, published in mid-April, suggests that, because of COVID-19, over half a million organisations in the UK (509,000) are in “financial distress” – and more than 10 per cent of those stricken businesses are in the real estate and property industry. The figure of 56,421 marks a 17 per cent increase compared to the Q1 2019 report. Moreover, the 17 per cent surge was the most significant jump across all sectors. The immediate outlook is even gloomier.

“Coronavirus has severely impacted both the residential and commercial property market, effectively grinding it to a halt,” says Julie Palmer, Partner at Begbies Traynor. “With the number of businesses in significant distress increasing by 6 per cent to 56,000 in the first quarter of the year alone, we’re expecting an even bigger increase when we next take a look at the readings for Q2.”

It begs the question: how prepared was the property sector for a black swan event? And given the level of trauma felt across the residential and commercial markets, could – and should – organisations have been in better shape to withstand severe damage?


“As this has been a health – as opposed to an economic – crisis, it would have been near impossible to prepare for something that has affected the world on such a large and quick scale,” states Andrew Ward, Managing Director of Solomon New Homes. “Economic downturns do have warning signs such as restrictions on borrowing getting tougher and rising interest rates.”

The timing of the pandemic is especially lamentable given the property sector was enjoying a post-Brexit boom after years of little movement, because of the loss of confidence around the European Union membership referendum in 2016. Mr Ward says: “Following Brexit the market was looking strong and on a growth trajectory, which stalled completely. A pandemic on this scale could not be predicted.”

Alex Gibbs, Co-Founder and Director of Built Asset Management, a London-based co-living operator, argues that the last global financial crash, a dozen years ago, prompted property business to shore up their defences and smarten up their acts. “One of the few positives that we can draw from the hugely unfortunate pandemic and subsequent market reactions is that, on the whole, the measures imposed on and by banks in the wake of the 2008 financial crisis have been broadly successful in preventing the UK residential sector from being over-leveraged,” he says. 

“This creates an industry that is more robust and better able to survive in difficult times. That’s not to say this isn’t a hugely difficult time for the sector, but those measures do seem to have had a positive impact.”


Evan Maindonald, Chief Executive Officer of MELT Property, concurs that those who failed to heed the lessons of 2008 have only themselves to blame. “The best way to prepare for something like the current crisis is to ensure your business is conservatively run, profitable, and has cash reserves or undrawn facilities,” he says.

“In the property sector, leveraging is necessary to facilitate growth but should be followed by a period of consolidation, paying down loans and strengthening the balance sheet. For those companies that survive this crisis, it is a ‘shot over their bows’.”

Like many in the industry, Marin Gibbon, owner of Kent and Essex estate agents Balgores Property Group, moved quickly when he spotted the likely impact of coronavirus. As a priority, he dialled up his company’s technology capabilities. “I don’t think you can ever truly prepare for something on this scale,” he says, “but something we did was use the period before lockdown – while the business was still running as usual – was to video our properties. That [filming] has enabled us to produce some business, particularly on lettings.”

Shaun Dawson, Head of Insights at DeVono Cresa, believes that “the commercial property industry has not been caught entirely off-guard, as most firms had planned for short-term uncertainty during the Brexit phase”. 

Again, those who have invested – and continue to invest – in tech are in a stronger position. “Many businesses had already started using new forms of technology to connect virtually with clients,” he continues. “However, due to the fast-paced spread of the virus and the speed at which the lockdown occurred, the industry has been adjusting to the new norms as they appear. The need for enforced social distancing, especially in closed spaces such as offices, means that new solutions are needed.”


Duncan Swinhoe, Managing Principal at leading global architecture firm Gensler, says we should all be thankful for the level of technology at our fingertips. “If the pandemic had hit five or six years ago, we would not have seen such a seamless transition into remote working,” he posits. “Technological advancements within property over the last few years have enabled the industry to transition to working from home quickly.

“[In architecture] these include increased use of BIM (Building Information Modelling), and a rise in the use of drones to conduct on-site surveys. During Covid-19, these technologies have meant workers can practice social distancing more effectively and have allowed the industry to continue to operate during the pandemic.”

Mr Swinhoe adds: “Even after the industry returns to the physical workplace en masse, we are likely to see the technologies now in place, as digital building models and virtual meetings continue to play a huge part in everyday life.”

Tech-powered evolution is critical, agrees Garry Treagust, Partner and Head of Commercial Property Group at law firm Trethowans. But he believes it will take some time for those seeking to purchase or rent spaces to trust video technology and other tools. Especially given that for many prospective home buyers, it will be the largest expense of their lives. “Businesses have tried to adapt, but ultimately real estate is a confidence-based sector,” he counters.

With new research from The Royal Institution of Chartered Surveyors finding that, on average, its members expected prices would only recover their pre-lockdown levels in 11 months’ time, everyone associated with the property sector, and also the construction industry, will be willing that confidence to return as soon as possible.