FOREWORD BY EDITOR, ANDREW CHILVERS
As the Covid-19 pandemic continues to disrupt businesses across the world, one of the biggest debates being played out is the future of property – in the city centres and suburbs; in office space, commercial and residential.
Just what will the world of real estate look like at the end of 2021? Will cities return to normal, and office space and retail malls remain the same, or will they be changed forever?
Most legal and financial advisors in the real estate sector agree there is an element of crystal ball gazing, but likewise there are now clear signs of how things might just look in the near future.
Helping clients in the new normal: How are legal advisors assisting clients during the ongoing pandemic lockdowns? How important has the Counsel role become?
Just to come back to what Philip said, I think it’s very important now to be a “trusted adviser”. What this pandemic has shown is that the legal systems in our countries were not prepared for such a disruptive effect. Probably the most disruption in our region since World War II. Back then our legal systems were not really prepared for the changes the war wrought on society. This is fairly similar from a legal perspective. Clients need to have advice regarding the grey areas around what is going to happen.
This year we will see the effects of Covid-19 really start to bite, especially in retail and fashion; those guys need to buy their collections a year ahead. They have been buying the winter collection of 2021/2 and already looking into the spring collection of 2022. They’re still stuck with a considerable part of their stock from winter 2020/1. As a result, they’ll have huge cash
flow problems. It’s worth noting that even though the shops are open in Belgium, people won’t be able to shop in groups and for most that it is the shopping experience they prefer. You can only have one customer for every 10 square metres of retail surface, so you can’t shop as a family, for instance, which is very typical here.
This year is going to be a critical one for all the players in the market and those that do not have a cash buffer will be kicked out. Those who have jumped onto e-commerce will have a bigger chance in surviving.
Sound of the suburbs. As more people and businesses flee city centres for the suburbs, will real estate investors look more closely at long-term suburban development projects?
I agree with Philip and Jaap. Pre-pandemic, hybrid remote working made up 23 percent of the workforce and this is now predicted to increase to more than 50 percent. No doubt this will present a challenge for owners of office buildings to see how they are going to deal with tenants’ requests. I agree with Philip that businesses will need office space in the future, albeit downsized from how it used to be. They won’t necessarily move out of the city centres but downsize rather than relocate to the suburbs.
The residential trend will be different and what we’ve seen during the pandemic is families moving out of the city centre to the suburbs for more space or buying second homes or apartments on the coast, that is a big increase.
Nevertheless, I don’t believe there’ll be an exodus from the city. For city centres it’s always going to be location, location, location. That will remain important. Also, for Brussels, it’s worth noting that there are a lot of EU and international institutions based in the city. Consequently, our real estate market never really rises or drops sharply. A lot of it is public sector and it is a balancing factor, which is not as prone to be affected in the short term by a pandemic like elsewhere in the EU.
“The mall stores are done.” How long will it take for shopping malls to recover from Covid-19 in your jurisdiction?
I agree with Philip. It’ll be the same for Belgium. The most popular shopping centres at the moment will have less of an issue because they have the benefit of location. In addition to “location, location, location”, it’s going to be the credo “flexibility, flexibility, flexibility” for the shopping centres. They will have to show their robustness in the way they adapt.
What Philip said is correct, giving an experience so people are drawn into the shopping centres; that’s going to be the most difficult challenge for them as we will be faced with further bankruptcies of some retailers. Then the challenge will be to fill those spaces. It is the businesses that think outside the box that will survive. Also, don’t forget that people have saved money during 2020, so they’ll want to spend it – and not just online.
E-commerce is not going to disappear after everything reopens but people will want to have a mix of the comfortable ordering online, but still want to touch and feel stuff goods. “Hybrid” is going to be the buzzword in retail, in offices and even in the logistics sector