The property industry is expected to see a slight disruption to business activity as a result of the coronavirus outbreak and is being urged to put in place measures to stop the illness spreading, for example across construction sites.
In the North West and beyond, property companies are drawing up strategies to reduce negative effects of the outbreak, and compiling research to predict how it will affect deal-making and projects.
“Commercial real estate will see secondary impacts from reduced economic activity and temporary ‘wait-and-see’ disruptions, because elevated uncertainty and risk will cause some businesses to delay investment or expansion plans,” a report from consultancy Avison Young said.
In the development market, disruption to Chinese raw materials “could delay or defer construction orders, particularly if locally-sourced alternatives prove more expensive,” the report added.
The sectors most vulnerable to disruption in the short term are retail, travel, hospitality and leisure, as members of the public reduce travel and shy away from crowded places, with an impact on shopping centres, hotels, restaurants and airports.
Disruption to supply chains is especially likely to impact the industrial, shipping and warehouse sectors, while some cross-market investments and capital markets transactions will slow due to practical constraints on completion, such as travel restrictions impacting on-site due diligence, or concerns over occupier demand.
Overall, transaction volumes are likely to fall in the first quarter of 2020 and potentially into the second and third quarters, as fewer new transactions are initiated, the report said.
“Longer term, the changes that businesses and individuals implement to cope with the outbreak will accelerate trends already evident in the market, including deglobalisation of supply chains and a shift towards online retail and flexible working practices in the service sector.
However, the report assumes the outbreak will be contained before it causes “extreme economic disruption”. Demand for real estate investments remains “high”.
Other commentators warned firms to assess and manage the risks.
Ian Atkinson partner in the construction and engineering team at law firm Womble Bond Dickinson, said that coronavirus poses a further challenge to the construction industry, which has had a “particularly difficult few years with uncertainty around Brexit, high numbers of insolvencies, high-profile building safety concerns, and more.”
If the UK were to find itself in a situation similar to Italy, the potential impact on the construction industry is clear, he added. “There would be delays on site and risks to a workforce that often finds itself working in close contact with each other.
“Businesses should consider in advance how they might deal with a worst-case scenario and check whether existing contract arrangements offer any sort of guidance as to who bears the risk.”
Industry body the National Federation of Builders has sent out construction-specific advice to members and updated the member area pages of the website. This week, it postponed the Heritage Conference it was scheduled to stage on 26 March, until 9 September, amid concerns raised by members, sponsors and stakeholders.
The annual MIPIM property conference has already been postponed to 2-5 June.
A spokesperson for construction group Kier told Place North West: “As a responsible business, the health and welfare of our people is paramount. We have provided our employees with guidance and precautions to follow using the Government’s advice.
“We are ready to implement business continuity plans if necessary and are continuing to monitor and update our employees with the Government’s ongoing advice.”
Some organisations are considering installing fever-detecting CCTV cameras in their workplaces to help identify and isolate those with the virus, while the Confederation of British Industry has called for an extension of sick pay rights amid the outbreak.