Impacts and Risk Management of COVID-19 Pandemic on Real Estate Supply Chain

Abstract

Industry experts internationally have raised concerns regarding the significant risk posed to the real estate sector by the unprecedented global pandemic of Covid-19. The influence of Covid-19 has been swift, and with emerging wide-ranging consequences. The stay-at-home-policy has stagnated real estate and other economic activities. Many lenders, buyers and estate agents are evaluating the threats and opportunities in their operations. Developers face stoppages resulting from the impact and inherent risks of the stay-at-home policies on the built environment, and real estate chain. Return on investments initiated, but not completed due to the pandemic negative effect has resulted in a financial crisis. Similarly, there are fears that income streams, such as rental incomes, and mortgage payments, which are already being affected negatively in the short-term may worsen in the long-term due to economic recession. The purpose of the study, therefore, is to identify any COVID-19 pandemic impact, its mitigation for the tenant, and across the supply chain within the real estate sector in the United Kingdom. The study is based on a qualitative descriptive research design. The required data has been collected mainly through an extensive review of the available secondary sources. Occupiers’ Sentiment Index and past recessionary financial performance were used to provide a wide-ranging insight into crisis effects on the macroeconomy of the property market. Consequently, two procedural approaches are utilised; firstly, the economic recovery scenario V, U, W and L shapes, are analysed to determine the potential recovery pattern of supply chains across the real estate sector. Secondly, the use of a legal context to mitigate the pandemic risk across the sector. The findings reveal an emerging dynamic trend, rooted in contract clause revamping, as suggestive of a mitigation approach by the industry. The significance of the study provides a robust platform on which a long-term response to any future unprecedented pandemic within the real estate-built environment can be delivered.