The corona crisis has hit us at an unprecedented speed. And once again, the major role of real estate in our modern economy is proven to be crucial. We read many reports about the effects of this crisis on the real estate market; alarming reports, wait-and-see reports, as well as we-will-manage reports. Many of these messages have in common that almost everyone is aware of the permanently changing market circumstances. While most of those messages is about real estate investment, let me express some thoughts about real estate development, a business that is very close to my heart.

As was obvious in many previous crises, the real estate market follows with a certain delay after an economic slowdown. Although this may differ this time, within the real estate sector, real estate development especially, is at the beginning of a slowdown.

On the short- and mid-term, running projects are mostly continued. But initiating new projects while there are many uncertainties about the supply side (like prices of land) and the demand side (how many will I sell or rent out at what price?) will at least be slowed down. Let alone what tremendous long-term effects this crisis will have. My belief is that the long-term effect on real estate development will be even more drastic.

A key challenge will be to what extend developers are able to adjust their business to market changes, in a strategic matter. This is often called the Adaptability Quotient (AQ), expressing “the ability to adjust course, product, service, and strategy in response to unanticipated changes in the market”.

“A key challenge will be to what extend developers are able to adjust their business to strategic changes in the market.”

If there is any business where this applies, it should be the real estate development business. Many questions arise and should be answered during this crisis:

• Will working at an office building remain that important as before, while workers get used to working online from their home office and many people seem to prefer it?
• Or will a kind of a “1.5 meter working environment” lead to an increased demand for office spaces? And what will happen to the required quality of the working environment?
• Should real estate developers, even more than they do now, rapidly focus on “spaces as a service” while employees realize that flexibility, technology and complementary service is of great additional value?
• And should the quality of developed houses be changed to support a perfect mix of live and work?
• How will the retail market recover from the coronavirus?

These are the kind of questions to be answered from the outside in, to be followed by internal questions concerning flexibility of processes, staff and IT-systems. These and many other almost existential questions will arise in developers’ boardrooms.

It is hard to realize that we are still talking about real estate, Immobilien (German) and l’immobilier (French), vastgoed (Dutch), suggesting that our business is as fixed as a rock.

The good news is that people will not massively live, work, shop or recreate in the open air. Assuming that the number of hours we will stay inside a building remains the same, it is realistic to assume that there will be no long-term downturn of the real estate market.

But the ability to adjust your business to a rapidly changing market will ultimately determine whether your business will stay healthy and profitable in the future.

I wish you a high Adaptability Quotient! Stay healthy!