The Current Challenge
Estate agency investments over the past several years have been able to generate steady cash flow and to yield significantly over traditional sources like corporate debt with just a bit more risk. However, the reality has changed since the coronavirus outbreak. Across the entire value chain, estate agency participants have been hit very hard. Service providers responsible for sales, letting, property photography and floor plans
have been struggling to mitigate the health risks for both their customers and employees.
Many developers are unable to obtain permits and are faced with falling rates of return, stoppages, and construction delays. In the meantime, many operators and asset owners are faced with drastically lower operating income, and most are very nervous about how many of their tenants are going to struggle to be able to make their lease payments. The words of the day are "abatement" and "concession" and players are working quickly to determine who they should apply for and how much.
Behavioural Changes that Might Outlive the Current Crisis
Estate agency operators and owners across nearly every asset class are currently considering several different long-term effects from the coronavirus outbreak as well as required changes that the changes will likely bring. For instance, the multiyear trend toward open-plan layout and densification within the commercial office industry might sharply reverse.
How the Crisis is Being Navigated by Leading Estate Agency Operators and Owners
Although it is harder to predict the longer-term consequences, the immediate market impact caused by the coronavirus are quite clear - the sell-off in the public market of certain types of estate agencies has been dramatic
. All companies, both private and public, are working very hard to navigate the current crisis regarding end-users, tenants, and staff of the space while facing some very tough business trade-offs at the same time. A majority of industry leaders are seeking to strike the proper balance between strengthening their competitive advantage further and capital preservation.
Earning the Loyalty, Trust, and Respect of Employees and Customers
Above all else, operators and owners need to protect the health and safety of people by any reasonable means possible. Leading operators need to over-communicate to ensure they fully ensure the needs of their tenants during this time and to protect everyone within their environment to lead to some behavioural changes. That can make communication as a company-level brand more common (instead of a property-level brand) to help speed up a current trend in the market.
Centralising Cash Management
Given that estate agencies are highly decentralised, many of the critical decisions impacting cash flow are made on the property level. However, given all of the uncertainty surrounding the depth and duration of the current crisis, more centralised direction for property-level cash management is being provided by top management along with company-level credit lines and balance sheet decisions. All management levels - including those at both the company level and property level - are started to identify levers of efficiency and when they should be pulled based on the performance underlying both the business overall and the individual properties.
Making Informed, Tailored Decision, Especially with Commercial Lease Concessions
Although it can be quite tempting to make assumptions about the economic impact of the coronavirus outbreak, the corresponding policy responses at the federal, state, and city levels are not going to be uniform across all estate agency portfolios.
Making the Digital Leap
The estate agency industry, before the current crisis, had been moving towards digitised processes and coming up with digitally enabled services for users and tenants. Almost instantly, the lockdowns of physical areas and physical distancing have magnified just how important digitisation is, especially in terms of the customer and tenant experience.
Rethinking Estate Agencies' future
Some landlords are beginning to think ahead to the time when the crisis has ended. Strategic review processes aim to understand how the use of an estate agency might change in the future. However, instead of relying on traditional customer-survey-driven or economic approaches, estate agency industry leaders are looking for answers from technologists, futurists, sociologists, and psychologists.