Property Implications as COVID-19 Fast-Tracks the Future of Work

Royston Capital Investment Committee member, Victor Yeung, recently wrote about the impact COVID-19 is having on commercial property markets from his vantage point in Hong Kong. Mr Yeung also provides some insight into what impacts we may see when economies recover.

Asia Pacific REIT’s

Hong Kong, along with Taiwan, was the first society alerted by the spread of Covid-19 outside of Mainland China.  Protocols, from both the government and corporates, were quickly implemented.  Scholars such as Dr. Ho Pak Leung of the University of Hong Kong have attributed the relatively low infection rates to the thoroughness in implementation, perhaps because the 2003 SARS epidemic and the responding measures are still well remembered.

The SARS epidemic was a defining moment for Hong Kong, when the city spent roughly three months in heightened mode to stop the spread of the SARS virus.  Some habits, such as wearing masks when one is under the weather and using serving chopsticks, originated during the SARS campaign but became part of the ingrained culture.

Covid-19 has brought back many of those protocols.  But after 17 years of IT-development, working and learning from home have become more effective. Even after Covid-19 abates, we expect this campaign to bring permanent changes that can influence the real estate markets.

Home office to increase office efficiency

Since the Lunar New Year, the Hong Kong government has announced that all civil servants were to work from home, and many corporates have made similar arrangements.  Granted, some companies need to maintain some physical presence at the office, and some have split teams to take turns between working in the office and from home on a weekly rotation schedule. 

While no precise numbers are available, the number of people switched to home office is probably in the hundreds of thousands – perhaps reaching as many as half a million.  As of this writing (in early March), many of these measures are still in place, meaning the work-from-home protocol has already been in place for six weeks and could last for another month.

The work-from-home protocol took some time to take root.  For example, in the first week, one batch of highflying management trainees of a major bank was caught hiking during work hours.  But as the society understands that the protocol can last for weeks, work productivity gradually picks up.  Modern IT systems allow staff members to access work information remotely.  Many calls take place via internet phones or video chats, allowing staff members to stay in touch with both internal and external contacts.

Working from home has some benefits to the staff, from reduced or eliminated traveling time to a healthier diet by eating at home.  And in other societies, working from home is often already part of a work-life-balance program.  Even allowing staff to pick one day per week to work from home can potentially save up to two hours of traveling time. 

Companies, especially those on flexible workstation arrangements, could embrace a more permanent arrangement to reduce the necessary office space.  For example, a one-day-per-week protocol could mean that required office space is reduced by 20%.  Incrementally, the protocol would marginally reduce office space requirements, but increase the productivity and, thus, potential rent of the space.

Video calls ingraining into the society

All Hong Kong schools from primary schools to universities, have been suspended in attempt to reduce cross infections.  But many schools maintained their teaching through online means.  My 8 years old son is now taking up to five school lessons per day via online video chats with the teacher, and many of his friends are taking extra-curricular activities with video calls too.  Even my lectures for a master-degree program have moved online.  

As a lecturer, I invested about 50 US dollars on new equipment, from a light stand to a better microphone. Similar to the work-from-home situation, once the society realized that the protocol could last for weeks, more people invested the time to create a proper video call set up.  In March, I have done online webinars and headline competitions for two industry organizations, and the format has received favorable feedback.

Another industry organization has long relied on sponsorships to host continued professional training talks, because of the cost related to renting conference spaces.  Responses from Covid-19 have forced the organization to start offering well-designed webinars, and the professional members have gradually embraced the format. 

Thus, the organization now seeks feedback if webinar should become a permanent feature, perhaps alongside the traditional face-to-face seminars.  This can increase the number of training offered and diversify the topics discussed.

In the past, we in the finance / real estate sector often saw video conferencing with clients as less desirable than actual in person meet ups.  However, as video conferencing penetrates through a large proportion of the society, more meetings could take place through the internet. 

This will further reduce the apparent distance between office nodes, and perhaps provide an incentive to investigate alternative markets.  Over the last several years, Island East and, to a lesser extent, Kowloon East have both seen large banks, law firms, and other corporates moving in, even though the demand in Central has been strong enough to maintain a respected rental premium.  A more widespread use of online meeting tools can lessen yet another barrier to move.  Through time, this may contribute to a reduced rental gap between Central and the other hubs.

In Australia, we can draw similar conclusions to those theorised by My Yeung.

• Large corporates seeking office space outside the CBD.
• Smaller office space supplemented with more flexible work from home arrangements.
• Increased use of video conferencing.