McKinsey have written a very insightful article highlighting the challenges facing the real estate industry in the current climate and the ways in which the real estate players will have to adapt and reinvent.

Physical distancing has changed the way we interact with physical space and the knock-on effects of the virus outbreak have made the demand for many types of space go down which has created an unprecedented crisis for the real estate industry.

We are likely to see transformative and lasting changes in behaviour. Consumers forced to shop online because of closed shops may permanently adjust their buying habits. Before the pandemic, consumers were already shifting their spending away from physical stores to e-commerce. 

This long-term trend may accelerate faster after the crisis – especially as many previously struggling brands are tipped over (the likes of Debenhams, Oasis and Warehouse struggling does not come as a surprise to us) the edge into bankruptcy or forced to radically reduce their footprint. This shift may also further boost already high demands for industrial space and self-storage. 

Within commercial office space, the multiyear trend toward densification and open-plan layouts may reverse sharply. Many real estate players will change how they make portfolio and capital expenditure decisions. In the residential real estate market, many have invested in their digital offering by doing virtual open houses and showings.