ANDREW CARBERRY, DIRECTOR, POWER PROPERTY
‘Where do we go from here?’ is the opening line from Radiohead’s 1995 album ‘The Bends’ and it is an appropriate place to start to consider the impact the novel Coronavirus COVID-19 is having on the property market.
We are still in the midst of this pandemic so it is difficult to accurately assess the actual affect COVID-19 will have ultimately and this will only be borne out in time but we can now look at perhaps the emerging trends and consider what the legacy of this virus will be.
Did we think six months ago that a virus could bring a shuddering halt to the world’s economy? No. Yet that is exactly what has happened. Akin to a dastardly scheme in a James Bond movie where the villain holds the world to ransom except, there is no villain, but rather nature has flexed its rather powerful muscles and shown us that we merely exist at its whim.
What we do know is that COVID-19, in the short time it has been with us, will have a legacy that will live long in the memory. Emergency measures were introduced on an unprecedented scale by a Government who weren’t even supposed to be in office yet arguably did remarkably well in the circumstances and we learned that closing a country is much easier than reopening one.
What we do know now is that social distancing is likely to be here to stay, being forced to stay at home has heralded a massive shift to home working or flexible working and the threat of an economic lockdown remains with us as fears of a second wave are heightened.
So how has COVID-19 impacted on the property market so far? Well it is fair to say that all sectors of the market have been affected, not all adversely, and the impact varies depending on the sector. For example, we entered this COVID emergency with a housing crisis. The virus has stopped virtually all international travel to and from Ireland. The volume of houses available to rent, particularly in Dublin, shot up as the Air B&Bs market collapsed. This has led to an increase in houses being offered for sale to and ultimately an easing of the housing crisis, perhaps temporarily. Rents have had a downward trajectory and anecdotally, rents in our major cities have come back aided by the lack of student accommodation requirements as colleges move to remote or online classes.
Interestingly, since we embarked on our Reopening Ireland journey five weeks ago and we prepare for further easing of restrictions in the coming weeks, residential demand has been very high which is supporting prices. However, this is largely because we had such low levels of available stock going into the pandemic. As supply is added, and as people come off COVID income support, we could see downward pressure on prices.
The banks have a major role to play and their actions will have a bearing on how the market adjusts. For example, anyone who was approved for a mortgage prior to the pandemic but had not completed a purchase, will have their application reassessed and if they have lost their job, even temporarily, they are likely to be asked for six months payslips after being re-employed or may have their application refused.
COVID-19 will really affect the workplace and how we do our jobs. Office demand is likely to be muted, particularly in the regions. Many deals that were in the early stages of negotiation have been postponed, which is understandable given that it is difficult to plan for expansion when employers don’t know if the space they anticipated taking is going to be appropriate with new social distancing guidelines.
A surprise is perhaps the interest in flexible office solutions or co-working space. Social distancing makes what we have come to know as hotdesking problematic and unviable but there appears to be increased demand from companies for people to work in teams of pods and moving staff off-site allows employers to assess their own space requirements. The lack of initial capital investment and the ability to terminate a lease within one month is a big attraction and the ability to lease such space now on longer terms deals up to four years nine months adds to the attraction.
One sector that has performed very well throughout the COVID crisis is the industrial sector. Industrial demand has increased for larger warehouses of between 25,000 sq. ft. and 100,000 sq. ft. and these requirements are difficult to find solutions for because of a lack of available stock. The logistics and distribution sector has seen the lion’s share of the growth with the acceleration of the more to online shopping but also because of Brexit stockpiling and the growth of regional distribution centres and data centres.
The retail sector, in particular the high street and shopping centres, has been severely impacted by the pandemic. A distinction has to be made for grocery stores, pharmacies and other ‘essential’ stores that were able to remain open during the lockdown. The impact for retailers without a good online presence has been particularly bad. Expect to see retailers going into prolonged sales after reopening in an attempt to flog dating spring/summer stock and claw back some of the lost custom over the past three or four months.
Retail has to adapt to the new circumstances and with social distancing measures and queuing for popular stores, a strong online presence is now essential. There have been some very high-profile casualties including Laura Ashley, Mothercare, Coast, Oasis and Monsoon and this is a trend that has followed UK shopping centres who were already struggling with Brexit. One positive retail story is the move back to the local shop, butcher, and fruit and vegetable stores.
Arguably, the hospitality sector has been hardest hit. It was the first sector to be affected and will be the last to reopen following the easing of lockdown restrictions. The easing of severe travel restrictions and quarantining requirements following travel will gradually see a return to foreign travel but it is likely to be two years before we get to pre-COVID levels of travel. Ireland welcomed over 8 million visitors last year and this has been wiped out this year.
The indigenous market just cannot make up for this loss. Social distancing measures have been altered for this sector and this is very welcome. Indeed, hotels and pubs have shown the capacity to innovate and adapt to the ‘new normal’ but nonetheless 2020 is now about survival.
One of the remarkable things to emerge from the pandemic is the sense of community and the level of resilience and positivity people have shown in the most remarkable circumstances. This meithal is an Irish trait and we have shown an amazing ability to endure, now we need to adapt before we can once again prosper.
Andrew Carberry is a Director of Power Property and a member of the Society of Chartered Surveyors Ireland and the Royal Institution of Chartered Surveyors and a Registered Valuer. Power Property has offices in Athlone, Galway and Limerick.
