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The Covid-19 pandemic is continuing to cause major disruption to the UK’s economy and businesses. Our aim during this time is to support our clients and contacts by sharing relevant updates, together with our insights into how the real estate industry will be impacted.
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Andrew Teacher and the Blackstock Consulting Team
DAILY BRIEFING WEDNESDAY, AUGUST 12th, 2020
UK Government Response Updates
The Chancellor could shelve plans for his autumn Budget until next year as fears of a second wave of coronavirus grow, instead delivering a “mini-spending review” that allocated spending to departments for just a single year.
Health Minister Edward Argar had to downplay a new study after preliminary findings contradicted “blanket assurances” from the Government that it was safe for all children to return to school next month.
Pupils north of the border, meanwhile, were celebrating after Scotland’s education secretary, John Swinney, reinstated more than 120,000 marked down exam grades.
The UK suffered its biggest slump on record between April and June as coronavirus lockdown measures pushed the country officially into recession, with the economy shrinking 20.4 percent compared with the first three months of the year.
However, glimmers of a recovery could be seen in June, when the government started to ease restrictions, said the Office for National Statistics.
Jonathan Athow, deputy national statistician for economic statistics, said: “The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and housebuilding continuing to recover.
“Despite this, gross domestic product (GDP) in June still remains a sixth below its level in February, before the virus struck.”
Global stocks were rallying on hopes of further stimulus to combat the pandemic as the S&P 500 in New York rose by 0.5 percent at the start of trading to about half a percent below the peak it reached in February, before COVID-19 fears gripped US and global markets.
US gains followed a broad advance in Europe, with the Stoxx-600 rising 2 percent and the FTSE 100 up by 2.1 percent.
Market confidence is being boosted by monetary and fiscal stimulus as well as the prospect for an effective Coronavirus vaccine after Russia “cleared the world’s first Covid-19 vaccine for use and hopes to begin mass inoculation soon, even before clinical testing has finished” – despite widespread scepticism.
After examining UK mortgage data in the 12 years to 2018, the Bank of England revealed the average age of the first-time buyer by only 12 months to 31 years old over that period – despite a sharp fall in property transactions and home ownership among the young.
Bellway has warned that coronavirus could result in years of lower profits. The Tyneside-based housebuilder sold 7,522 homes in the year to July 31, almost a third less than a year ago, with a greater proportion than ever were sold using Help to Buy, with 57 percent of its buyers using the scheme since March 23, up from 35 percent in the same period a year earlier.
Airbnb plans to file IPO paperwork with the US Securities and Exchange Commission later this month, laying the groundwork for a potential listing before the year’s end. The home-sharing platform was recently valued at $18 billion, down from an earlier valuation of $31 billion.
Researchers have turned house brick into a battery that can store electricity, raising the possibility that buildings could one day become literal powerhouses, suggests the Guardian.
Not enough is being done to incentivise older people to move into more suitable accommodation, according to Eugene Marchese, co-founder and director at L&G-backed later living developer-operator Guild Living.
Speaking to Property Week, Eugene said: “A nationwide drive to deliver more purpose-built later living communities that accommodate retirees’ individual lifestyle and health needs will also be critical in looking after Britain’s growing population of older people.”
Despite the worst recession in a century expected confirmed today, consumer spending in the UK is approaching pre-pandemic levels, driven by sunny weather and the reopening of non-essential shops across most of Britain.
Figures from the British Retail consortium (BRC) and accountancy firm KPMG indicated that recovery is already underway via the consumer, as total sales increased by 3.2 percent in July compared to June.
Debenhams is to cut a further 2,500 jobs in its department stores and warehouses and is reducing the number of shop assistants in its stores despite the reopening of 124 of its stores after lockdown.
The Telegraph reports that the drop in employment is affecting oldest and youngest employees the most, with people aged over-65 saw a fall in employment down 11.4 percent to 1.3 million, while workers aged 16 to 24 saw employment plummet 2.6 percent to 3.7 million.
What this could mean for the future of the commercial real estate sector has been highly contested in recent months. However, Derwent London, Google’s first London landlord, has argued that future offices will be greener and “long-life, loose-fit” adaptable spaces, with larger common areas to focus on relationship building.
But despite this confidence in a more flexible future, the Wall Street Journal reports that many coworking firms are shutting down some of their sites, as demand for office space declines and overexpansion costs start to hit.
However they may soon be welcoming workers from oil giant BP, which is considering shifting almost 50,000 employees towards remote working and flexible workplace layouts in the wake of the pandemic.
Lastly, insurance provider NFU Mutual says landlords have been hit by a rise in fires in commercial properties, with the number of claims increasing by 46 percent over lockdown.
Former Prime Minister Theresa May awkwardly lodged her opposition to a development in her constituency the same day the current PM Boris Johnson launched his radical shake-up of the planning system, reports the Times.
Planning magazine has a handy outline to the major changes to the planning system.
Housing secretary Robert Jenrick has announced funding targeted at helping urban and deprived areas create new neighbourhood plans.
Transport & Logistics
The Financial Times has a good overview of what’s happening in logistics real estate as the sector continues to draw attention (and money) from investors, with the likes of Meyer Bergman targeting €2 billion in total value for its last-mile logistics platform Crossbay.
Sales of secondhand cars have dropped significantly during lockdown despite many people opting for private transport options for a safer commute.
Just over 1 million used cars changed hands in the second quarter of the year, down 48.9 percent compared with the same period in 2019 according to the Society of Motor Manufacturers and Traders (SMMT).
Almost half of people will never fly as often according to new research, suggesting airlines may find it harder to recover than anticipated.
The news comes as consumer rights group Which? said airlines are still taking too long to refund passengers whose holidays have been cancelled due to coronavirus.
The number of people employed in the construction sector fell by 83,000 in the second quarter of the year, according to the Office of National Statistics — the steepest decline since the first three months of 2010 when employment dropped by 103,000.
Construction News reports that plaster and some other key building materials will continue to be affected by supply shortages, with ready availability unlikely to be re-established until mid-to-late September.
The RIBA has appointed its new president, Simon Allford, after securing 58 percent of the vote. Allford will take up his role as president-elect from 1 September, before becoming the 78th president of the RIBA in September 2021.
A surge in online shopping demands which has led to supply bottlenecks and higher prices means our “pandemic love affair” with e-commerce could soon sour, writes Conor Sen in Bloomberg.