Handling the black swan of coronavirus

How long will the coronavirus be around for? And how will it affect the outlook for real estate? Robin Marriott takes stock of the momentous developments over the past few weeks.

Well, this has been a dramatic few weeks to say the least.

The coronavirus is being talked about as a global black swan event. Mipim was ravaged by cancellations and the event organisers at press time eventually announced the event would
not go ahead and was moving to June.

Meanwhile, demonstrating just how polarised the property market in the UK has become: Blackstone spends £4.7 bn (€5.48 bn) on student housing firm iQ, Intu nearly goes bust with an urgent short-term financing problem, and Segro becomes the largest listed UK propco.

This is a good time to be a real estate reporter.

But less flippantly, what on earth is going on and what does it mean for real estate investing?

One viewpoint is that the coronavirus outbreak is hitting hotel, leisure and destination retail quite significantly and rapidly. UBS goes further and says the coronavirus has changed the outlook for real estate as a whole; travel disruption alone would bring a hiatus for six months, it warns. The other, more optimistic, view I have some sympathy for is that Covid-19 is causing a ‘wait and see’ attitude among investors, but after that it might even drive investors towards more real estate – not less – because of the perceived ‘safety’ of the asset class. Particularly, there will be a flight to quality.

I have seen this quite a few times over 20 years – unless the problem is an intrinsic real estate one (e.g. poor real estate or high real estate debt), investors invariably turn sooner or later to this asset class in times of uncertainty.

The question, therefore, is probably: how long will this coronavirus issue be around for? Of course, no one has the answer to that as of 28 February 2020.
Meanwhile, there is a sideshow going on, which is the way the organisers of Mipim handled the coronavirus threat. This has been a bit of a public relations disaster as some Twitter comments demonstrate.

While big attendees were cancelling plans and saying they were doing so in the best interests of staff, clients and to follow the World Health Organisation’s advice to slow down the epidemic, Mipim was doggedly issuing statements that the fair would go on.

One of the issues this raises is to what extent the organisers of Mipim have put people first, when the theme of this year's event is ‘The Future is Human?’

It seems damage has been done amid thoughts of hypocrisy.

Robin Marriott, Editor-in-chief


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