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A Letter From Lockdown London: How Real Estate Has Adapted To Survive

England entered its third lockdown on 4 January. Regulations say the country must stay at home until 31 March, but lockdown could last even longer.

And yet … despite a lot of frustration and a heap more resignation, London’s property business has carried on. Throughout three lockdowns, and against all expectation, it has not just survived. In some cases it has improved itself and even thrived.

This is the unexpected tale of how it came about, told by three of the people who made it happen. While a third lockdown has been a blow to hopes of a speedy 2021 recovery, the adaptations undertaken by the industry in the first two lockdowns have built in a resilience that is being called upon now in the depths of winter. 

Piccadilly Circus: Empty during London's lockdown

Lockdown 3.0 wasn’t a surprise. The English government had been warned by epidemiologists that social mixing at Christmas would cause trouble, while a new variant of the coronavirus meant transmission rates rocketed. The combination was literally deadly, as a surge in COVID-related deaths is now showing. Lockdown happened, just as everyone expected, immediately after the holiday.

The rules this time are tougher than in Lockdown 2.0 (November 2020) but not quite as tough as in Lockdown 1.0 (March to June 2020). Even so they mean the closure of office workplaces, and much of the normal business of property can’t happen. Valuations, meetings, grabbing a coffee with a client — all impossible.

The timing hasn’t been good for anyone, obviously, but all three lockdowns came at particularly awkward moments for Rob Jones. Yet his new business, Moorhall Capital, was founded during the pandemic and is racking up deals at a hectic pace. He has a pipeline of £100M funding awaiting completion before June.

Getting here wasn’t easy. Jones resigned from his job in January 2020 with the intention of setting up his own property debt advisory business. He planned six months of leisurely contact cultivation whilst he sorted out his IT and branding ready to start business once the exclusion period with his previous employer was over. 

“We’d just had a general election, Brexit seemed to be on the way to a solution, it felt like things would be more stable,” Jones said, laughing. “How wrong can you be?”

Just to cap it all, he caught COVID-19 in early March 2020. Whilst he was recovering England was locked down for the first time.

“This didn’t feel very good,” Jones said, with magnificent British understatement. “Then suddenly I started to get calls from former landlord and investor clients saying the rent payments they were due were not coming in. They wanted me to talk to the lenders for them. Since then I’ve been flat out busy.”

Zooming to success: Moorhall Capital's Rob Jones pictured during a videoconference

Brokerage involves a certain amount of hustle, and that was now obviously impossible. Zoom turned out to be a more than wonderful replacement. “I actually found it was easier to catch up with people during lockdown, because everyone was at home. People you might have spent weeks trying to get through to — well, you didn’t need to. There they were, waiting for your call, and happy to have someone to talk to.

“Normally business calls are quick and direct, but even busy people who would never come out for a meeting were chatty and engaged. I’d say lockdown was a very good time to get chatting. Of course, the problem was they would talk but nobody wanted to do anything so for the first lockdown I mostly sorted out the company name and branding.”

Jones said people “bent over backwards” to be helpful.

With visibility high and a contact list growing, Jones migrated from a crowded family sitting room to a small, chilly hallway at his home in London’s northern commuter belt. “It’s very cold but it has a view of the garden, and importantly it's mine and I can shut the door,” Jones said. “I put up some nice horse pictures and as a workplace it works. It’s better than sitting on the stairs and taking calls.” 

During the first lockdown Jones began to work on Moorhall Capital’s first deal, a transaction completed during the second. The deal coincided with the birth of his second son, which didn't make life easier.

Jones' coronavirus deals debut saw CBRE Global Investors Credit Strategies provide a £52M investment loan to retirement home developer Anthology, in a refinancing deal made necessary by the pandemic.

The deal refinanced 150 apartments that remain for sale at Anthology’s 195-home Wembley Parade and 316-home Deptford Foundry developments, both in Greater London. Building work on both was completed as the first lockdown began. 

CBRE Global Investors remained a pragmatic and patient funding partner,” Jones said. “They worked closely with us to structure a facility that gives Anthology the flexibility it needs to manage the sale of the remaining homes. It is testament to the quality of both projects that they have been met with continual demand in spite of the current headwinds."

By the time Lockdown 3.0 began, Jones (like almost everyone else) was adept at working in isolation. “I sense some people are more depressed, but I’m always positive. The good news is the lenders are back in the market, and they want to get things done,” he said.

CO-RE's David Ainsworth, pictured in the days when you could work from your real office.

David Ainsworth’s lockdown experience has not been as fraught as Jones'. No COVID, no babies, no new business to set up. The CO-RE chief executive spoke to Bisnow from an elegant library painted duck-egg blue. The betting is it is a lot warmer than Jones’ chilly home office.

Yet here too the elegance conceals the kind of difficulties that arise when the normal development pipeline abruptly stops working. Local councils, responsible for granting planning permission, moved their business online. What had been public meetings became Zoom sessions. Everything went remote. Since CO-RE has proposals underway in the London boroughs of Camden, Islington, Westminster, Lambeth and the City, this was a problem. How do we make progress, Ainsworth wondered?

Meanwhile, CO-RE was managing the construction of the 450K SF office scheme at 20 Ropemaker, London EC2. Work on-site was in progress. At first it looked like work on-site would have to stop.

“In some ways we were exposed. Work on-site at 20 Ropemaker stopped, but the contractor Skanska was great and work resumed, but with all the usual challenges of COVID social distancing,” Ainsworth said.

“The rest of our projects were in the planning stage, which was lucky, and one of the great successes of lockdown is local councils taking the planning system online. It has been better than anyone thought, an amazing experience.”

Ainsworth agrees with Jones that videoconferencing has improved and extended relationships. “The move to Zoom meant we’ve got time with local council design officers that we might not otherwise get. And we’ve had their undivided attention. The planning authorities have been great, all of them.”

All of which raises a problem for an office developer: If working from home is so good, why do we need offices? Hasn’t Ainsworth’s happy experience undermined his business proposition?

20 Ropemaker, London EC2, now under construction

Technology has to be harnessed, we can’t be ruled by it, and I genuinely think this period of remote working has to be seen as temporary,” Ainsworth said.

Ainsworth argued everyone wants to get back to the office. “Lockdown 1.0 was OK, it was the spring. But Lockdown 3.0 is cold and dark and there’s more of a bunker mentality. And if you all sit in your rooms, then you start to retreat into yourself.”

Far from being the kryptonite of the office market, working from home is its pyrite, Ainsworth insists.

“WFH is not kryptonite, which doesn’t exist, but pyrite which does — also known as fool's gold. It looks like the real thing but isn’t.”

Undaunted, Ainsworth and his team are pressing on with plans for the former ITV studios site at Upper Ground, Lambeth, London SE1. The site, sold in November 2020 to Mitsubishi Estate for £146M, is now being masterplanned.

Schroders head of UK Real Estate Investment Nick Montgomery has been buying throughout the lockdowns, and is one of WeWork’s landlords coping with the coworking provider’s 2020 rethink. WeWork has a 60K SF hub at Schroders' 260K SF No 1 Spinningfield, Manchester, and Montgomery said he has had to be pragmatic. By the time Lockdown 3.0 arrived, he was well-organised.

“The team is extremely well-drilled. We’re on the eighth iteration of our internal staff COVID handbook,” Montgomery said.

The handbook has navigated Schroders through the technicalities of pandemic-compliant building management and asset management.

“The great thing about asset management is that it is about how much mud you chuck at the wall. I mean that it needs lots of phone calls, to talk to lots of people and invest,” Montgomery said.

City Tower, Manchester

“It is luck as much as judgment that we’re not exposed to the most impacted parts of the property market, like the shopping centres," he said. "Across our £8B UK portfolio we own just one UK shopping centre, and even that has a lot of leisure in it. So yes we’ve had issues and had to do deals with tenants to defer rents, but we haven’t been involved in the firefighting some other asset managers have had to do."

In the final quarter of 2020 Schroders UK REIT collected 89% of rent due, which is ahead of the amount collected in the previous two quarters of 87%.

For Montgomery, the three lockdowns have been a test of business resilience. The good news is, everything worked.

“We’ve had good IT systems, and we’ve learned that our infrastructure as a business really does work, so Schroders can support people practically when they work from home. That helped enormously when it came to putting in place systems to manage rent collection during a pandemic. And we’ve learned a lot in the last 12 months,” Montgomery said.

Personally it has been a journey, too. Montgomery had never worked from home before the first lockdown. He still doesn’t seem very keen, but when he spoke to Bisnow his home office looked very orderly.

“Actually I requisitioned my wife’s,” he said. “This is much to her irritation.”

However, despite lockdowns, life in both the Montgomery household and at Schroders goes on.

UK GDP plunged during the first lockdown and, unlike some other major economies, it continues to fall, dropping another 2.6% during lockdown 2.0 in November 2020.

The figures for December and January will not be better, and the recession seems here to stay until at least the end of the year.

But the property market, usually the first to take a tumble when the economy crashes, has remained active. Not just active, but busy. Assets can be managed remotely, videoconferencing is surprisingly successful, big projects have moved ahead.

This isn’t British stoicism, it's simple adaptation.

“We’re just so lucky this pandemic happened now, when we have the technology to cope, and not 10 years ago,” CO-RE’s Ainsworth said. In the Zoom meeting rooms of London’s property industry, where the deals of tomorrow are being fermented, you will struggle to find anyone who disagrees.