Concrete Analysis | The Covid-19 outbreak and the implications for Hong Kong’s real estate sector

The rapid spread of the novel coronavirus disease is a public health emergency of international concern, for which the human and economic costs could potentially be devastating.

It follows a number of significant infectious disease outbreaks that have led to physical and economic losses over the past two decades. Given higher levels of urbanisation, globalisation, mobility and environmental changes, we can expect this trend to continue.

From a real estate perspective, the highest risk sectors would include hotels, retail, food and beverage, entertainment venues and other tourism-related assets. However, with an elevated level of fear, the impact is felt by all real estate players.

Organisations cannot prevent an outbreak, but they can be prepared to respond, remediate and recover. Real estate companies should implement a two-pronged approach, starting with establishing preparedness strategies that cover emergency response, business continuity, crisis management and crisis communications. Secondly, they should understand how existing insurance coverage may respond to an epidemic.

Across the broad spectrum of real estate, many firms plan for emergency situations that impact business continuity, but most are not prepared for potential prolonged impacts.

The potential organisational impacts of an epidemic run deep. Understanding and planning for these is an important first step, and it starts with people. In any epidemic, swift action can be effective in protecting the health and well-being of employees.

A survey undertaken by Mercer among Hong Kong companies is ongoing but initial results point to a high degree of preparedness and action to keep employees at home. More than 80 per cent of respondents have already made arrangements for working from home (WFH), with half of those doing so before the government press release was issued.