Some Long-Term Lessons For Real Estate Developers from COVID-19
The virus has occasioned a lot of learnings and changed the conventional way of working, for many sectors including the real estate.
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In more ways than one, the ongoing COVID-19 pandemic has impacted people, markets and economies around the world. The state of the crisis is yet to be fully determined as there is too much information available, changing frequently and causing confusion. Given the fact that the virus is exponentially contagious, its swift spread has made concepts such as social distancing, work from home and self-quarantine the new normal. This capricious scenario makes it crucial to possess a clear consistent overall direction especially in case of governments and organizations.
In India, the government's cautious approach has led to the effects of the outbreak being limited since it has proactively implemented a nationwide lockdown. The short-term impact is a complete shutdown of activities, but the mid- to long-term impact can only be assessed once we are able to reach the bottom of the crisis.
However, the virus has occasioned a lot of learnings and changed the conventional way of working, for many sectors including the real estate. Businesses have needed to adapt and evolve quickly to ensure that work is not impacted. There are quite a number of long-term lessons that have resulted from the outbreak for real estate developers.
Diversification of investment in assets is essential to reduce risk. Developers were in general investing in residential or commercial real estate but in light of the crisis, they have come to the realization that it is equally important to spread money in industrial, health, warehousing and other segments. By hedging the bets, they do not run the risk of losing a large amount of investment when the economy is affected. In addition, ensuring that the supply chain is adequately diversified and not entirely dependent on single source, will help in appropriate risk management in future.
Digital Ecosystem is a requirement that can no longer be avoided or delayed. The virus which spread from human to human contact has led to the comprehension that going digital with Big Data analytics can decrease the dependability on the individual, making it safer and transforming the course of financing and executing deals. New technologies such as artificial intelligence and the Internet-of-things are here to stay and pose great opportunities for the business by letting the buyer experience "look' and "feel' of a particular property. The built environment sector should now be aggressively gearing up adopt digital construction, precast, robotics and drone technologies as the labor challenges will continue to impact the business for times to come.
Sensing and controlling capabilities can be greatly enhanced through the use of data, allowing developers to handle various operations. Implementing analytics can aide developers in predicting and managing situations; connecting and collating data by leveraging machine learning algorithms enables functioning to be more intuitive and smoother. Data and analytics can be used to generate insights that can be utilized for taking informed location and leasing decisions.
Supply chain resilience is a critical aspect that needs to be considered from a developer's point of view. A breakdown in services seriously impacts a project by disrupting stock quantities. It is imperative to build a sustainable, flexible and responsive chain of supply to ensure work does not cease in case of any uncertain situation and projects are able to be on track.
Building agility into the business is of essence as the virus has clearly shown us, bringing economies across the world to a halt. It is essential for the developer to ensure that transition occurs smoothly and seamlessly from one platform to another without impacting continuity. Such situations may arise in the future and it is vital to create nimbleness for project delivery.
Apart from the lessons stated above, a developer should now invest heavily into conducting proper project feasibility studies. Variable cost models can also aide the developer to attract and retain buyers, by enticing them into investing money and making projects economically suitable according to every budget. Looking at innovative "real estate consumption models' will help spur the demand which was languishing even in pre-COVID days.
Keeping in mind the "Four Cs' can be a good place to start immediately for future-proofing the business:
Care covers thoughtfulness for the workforce, customers and partners. The flexibility to work from home in case of a stressful situation with respect to employees. Maintaining authenticity and transparency at work. Adopting a collaborative and upskilling approach at work, as and when required.
Conserve comprises cash, supply chain, talent, critical functions, business continuity plans and quick cover of business due to any knock-on effects.
Change includes rethinking the "new normal'; reinventing and taking up new approach to stakeholder engagements. Redesigning supply chain towards a "resilient brand'.
Construct which encompasses building resilience through redundancy, diversity, modularity, prudence and evolvability
The lessons that the COVID-19 situation has taught us are valuable, to say the least. By living under a lockdown, we have learned to adapt and discovered new ways to manage work and life. We have found that organizations with a faster recovery quotient constantly looked ahead and were quick to act in response to paradigm shifts. They explored different approaches to deal with the changing dynamics and created opportunities where none existed. This knowledge will arm us with confidence to face the challenges of a "new world' which we are entering in the coming times. It will remind us that every challenge has a huge opportunity code hidden in its DNA. One needs to recognize it through sheer conviction, agility and entrepreneurship.