Framework for easing England’s lockdown restrictions: implications for commercial real estate
Boris Johnson outlined the next stages in the easing of England’s tight lockdown restrictions that have been in place since January.
6 minutes to read
Background
Yesterday (22nd February) Boris Johnson outlined the next stages in the easing of England’s tight lockdown restrictions that have been in place since January. The announcement applies specifically to England, with the devolved administrations of Northern Ireland, Scotland and Wales free to follow differing strategies.
The Prime Minister’s statement followed data showing a sharp fall in new Covid-19 infections and hospital admissions, news that one third of British adults have now received a vaccine, and new evidence supporting the efficacy of single doses of the Pfizer and AstraZeneca vaccines commonly used in the UK.
Although the environment remains challenging for commercial real estate, the roadmap to a potential full easing by June provides a significant boost to sentiment for both occupational and investment markets. Achieving this goal will be subject to slippage if the government’s specified tests are not met. In addition, further questions remain over the return to workplaces and international travel.
Overall, however, this plan outlines a greater degree of clarity than has been enjoyed for much of the past year and will contribute further to the recovery in commercial real estate activity that we are already seeing.
We explore the detail of the framework and real estate implications in more detail below.
The Framework: key dates
The Prime Minister has set out a framework involving four steps, each with a four-week review of the data and one week’s notice before moving to the next step.
Step 1:
- 8th March: All schools and further education colleges return. University students on practical courses may remain. The return date of other students will be assessed by the end of the Easter Holidays.
- 29th March: The legal requirement to stay at home will end. However, the advice to work from home where possible and limit travel will remain. Outdoor sports including open air swimming pools, tennis and formal outdoor sports (with size limits) will reopen.
Step 2:
- 12th April: Pubs and restaurants to reopen without curfews or meal requirements, for outdoor use only. Non-essential retail and hairdressers to reopen. Indoor leisure, gyms and individual holiday lets reopen. Zoo’s, theme parks, and libraries to reopen.
Step 3:
- 17th May: Reopen pubs, restaurants, cinemas, hotels, theatres (subject to limits). Limitations on meeting outdoors lifted subject to limits of 30 people. Larger events trialled subject to mass testing.
Step 4:
- 21st June: Remove legal limits on social contact. Open nightclubs and larger theatre events – possibly in conjunction with testing.
The framework is subject to four tests to enable the next step to be taken: Vaccines deployed successfully to timetable; Vaccines effective in managing hospitalisation and deaths; No surge in hospitalisations following previous step; Assessment of risks not changed by new variants.
The government will undertake four additional reviews to help inform certain aspects of the plan.
These reviews cover:
- How long to maintain social distancing and facemasks (no date given for this review); this will inform working from home where possible which the Prime Minister stated should continue until the review is complete and guidance produced
- The return of international travel: a report by 12th April, with the aim of allowing summer travel to be planned
- The role of Covid-19 status certifications in combination with events / business
- How to enable the safe return of major events – this may be supported by mass testing
Implications for UK real estate sectors
The Prime Minister’s announcement of a staggered reopening of the UK economy strikes a measured balance between ambition and caution. We predict that this greater degree of clarity will be broadly beneficial for all major real estate sectors in the UK, albeit with some key short-term differences by sector, as outlined below.
Offices
An overt mention of a return to work and the workplace was conspicuous by its absence in the Prime Minister’s statement. In accordance with the fourfold plan and the prioritisation of outdoor contact ahead of indoor, even limited re-occupancy of offices remains some way off and is unlikely to be a reality for most businesses until the second half of the year. For now, the guidance remains to work from home where possible, but the lifting of the staying at home rule from late March is indicative of a route back.
Retail
Although reopening under Step 2 (from 12 April) means that “non-essential” retailers will be deprived of trading over Easter, for many the second busiest trading period in the retail calendar (2nd only to Christmas), a firm date to aim for is better than no date at all. The likelihood of both the business rates holiday and moratorium on forfeiture being extended has increased.
Logistics
In-store restrictions will remain in place when non-essential shops reopen (from 12th April), shoppers are likely to continue shopping online and limit their time in-store, meaning continued demand for home delivery along with click and collect options. Over the past year, we have seen record levels of demand for warehousing space with retailers and parcel carrier firms seeking to rapidly upscale their B2C operations in order to capture a share of the growing online shopping and home deliveries market. We expect this to continue as businesses accelerate their pivot towards more B2C retail.
Hospitality
Given roadmaps out of previous lockdowns, Food & Beverage operators would have expected to lag behind retailers in being able to reopen, but that is only partially the case. Those with outside space will be able to open under Step 2 (from 12th April), but inside catering will not be permitted until Step 3 (from 17th May), thereby creating a dividing line of distinction that will be subject to any number of loopholes and creative interpretations.
Hotels
Restrictions on leisure travel will not be eased in time for Easter and a level of ongoing uncertainty remains whether the reopening will indeed go ahead as scheduled on the 17th May. One of the biggest conundrums is deciding whether the risk of virus mutations will be too great to allow for the return of international travel, upon which the long-term stability and viability of the sector depends.
Health and social care
From the 8th March, care home residents will be permitted to have one regular visitor with indoor contact also allowed. This will be a clear benefit to the health and wellbeing of existing residents but also gives prospective residents and their families the vital reassurance needed. This will do much to improve admission rates and help operators to recover occupancy lost during the pandemic.
Capital markets
For investors, some uncertainty will remain in the short term, as will restrictions to travel, which could impede those who need to physically inspect buildings. However, it is likely that motivated investors will be willing to undertake necessary quarantine (as witnessed last year) and some Asia based investors are still purchasing the best in class core assets with only a virtual inspection. England (and the UK) remains a global safe haven, as evidenced by the strength of global investment last year, which held up extremely well amidst Brexit and the pandemic.