In 1957 I contracted the Asian Flu and I was off school for several weeks. I had a temperature of 40.5C at the peak of my illness while one of my close friends at school reached 41C. It was declared a pandemic at the time but there was no lockdown, even though over 33,000 people died in the UK and more than 1million globally. The Prime Minister, Harold Macmillan, was accused of acting too slowly – déjà vu?
I have lived through three pandemics and I am into my fifth economic downturn; with the benefit of that experience, this is how I see the future playing out:
1. The Government has published a code as to how landlords and tenants should approach their relationship stressing that where tenants can pay, they should. The problem with this is that it can be abused by some occupiers, leaving landlords with banking covenants very limited room to manoeuvre. Following the extension of the moratorium on rents, if those that can pay fail to do so it’s very likely that the Courts are going to be very busy in the autumn with winding up petitions.
2. If Mark Twain was alive today it’s likely he would echo that, “rumours of the demise of the office have been greatly exaggerated.” To many of us, working from home has been a novelty including spending more time with family. However, our economy has taken a hit and now is the time for the nation to get back to work. At Palace Capital we value in person social interaction and this is something you cannot replicate on Zoom. So calling the end of the office is premature.
3. It is also clear that buildings will need far more connectivity. At Palace Capital we have struck a deal on a number of properties with Backbone Connect and at our office development at Hudson Quarter York we have been graded Platinum by Wiredscore, making it one of the best in the country in terms of digital infrastructure.
4. Regional city centre offices are very well positioned to come into their own following this pandemic. Companies will question whether they need expensive Central London offices as rents in the regions are cheaper and housing is more affordable.
5. The car appears to be coming back as people in the short term avoid public transport, but this will change as the effect of Covid 19 diminishes. However, it is my belief that demand for electric cars could surge if they continue to receive favourable tax treatment.
6. The Chancellor and the Treasury team need to be saluted as in a very short time they put together structures to help companies and the self-employed during a very critical period. It was not perfect but when we hear from the Governor of the Bank of England and what he had to do to save the country from effective insolvency, this has been one of the Government’s few wins.
7. However, I am concerned that most members of the Government do not really understand business as most ministers have been particularly unimpressive except for the Chancellor. To allow tenants to effectively ignore their contractual obligations for 180 days is in one word “ignorant.” Pension funds, insurance companies, local authorities and charities own the bulk of UK commercial real estate. So, the continued non-payment of rent will affect the everyday person as well as landlords.
As we approach a Cabinet reshuffle, I hope that we will see more business friendly Ministers. We all need to work together for the hoped-for V shaped recovery which only the private sector can deliver. ‘It’s not the events that happen to us that define our happiness and success, but how we interpret them.’