The UK real estate sector will lose at least 15% of its gross value added figure for the second quarter of this year, even in a best-case scenario.

Data from PwC predicts the UK real estate sector’s GVA — the financial output of a company, sector or country, essentially what it produces minus what it costs to produce — would decline by about 15% in the event of a smooth exit from the coronavirus-induced lockdown. It wouldn't return to previous levels until the end of 2021, PwC forecast.

But if the lockdown is extended or needs to be reintroduced, the hit to UK real estate GVA could be as much as 35%, and the sector might take as much as five years to return to previous activity levels.

PwC said the hit to real estate’s GVA is worse than the UK business average, because real estate is hit from different angles. Many tenants are unable to pay rent, which hurts the income for property owners; and transaction levels are dropping because lack of physical interaction hinders real estate leasing and investment deals, which means income for advisory firms is also down.

PwC estimated that some agency firms have furloughed as much as 80% of their workforce, and that only 60% of March rent was paid. That rent figure will likely get worse in June, it said.

It also estimated that office occupiers will look to cut as much as 25% to 30% of their office space in the coming years, as more staff work from home. That figure was based on discussions with its clients. And UK real estate's GVA will be hit by the fact that building owners will need to spend a lot of money adapting buildings to deal with new norms of use, increasing expenses while income is down.

“The real estate sector undoubtedly faces some substantial short and long-term challenges from COVID-19, simply because of its exposure to almost every other industry that has proved vulnerable to the pandemic,” PwC UK and EMEA Real Estate lead Angus Johnstone said in a release accompanying the data. “Consequently, we are seeing a variety of long-held assumptions being challenged.

“Decision-makers must remain rational and strategically minded. Cost-saving measures should be a constant priority as a means of staying liquid, and executives must consider every option for shoring up capital.”