The COVID-19 pandemic has created potentially permanent changes to how we use buildings. The crisis has resulted in a significant drop in utilisation of many assets, particularly in central business districts.
Other assets, such as healthcare facilities, have experienced a more mixed picture and created new challenges in terms of health, hygiene and managing visitors. Hospitals have experienced a huge strain from an escalated demand, while other clinics have empty consulting rooms as services are delivered through telehealth rather than in-person.
Telehealth is on the rise, and is expected to lead to a permanent shift in Healthcare.
Post-COVID-19: permanent changes
Most analysis predicts that trends such as tele-health and remote working are likely to continue in varying degrees post-COVID-19. The rise of telehealth in the pandemic is expected to lead to a permanent shift in healthcare, with initiatives such as "virtual hospitals". Australian health minister Greg Hunt has also voiced his support for temporary expansions of Medicare-subsidised telehealth services to be made permanent.
Telehealth provider Rosemary Health has seen massive growth in the last few months and expects this trend to continue. "We are seeing our customers increase, have a great experience and change the way they want to manage their health. As more medical professionals move their consulting online there are opportunities for flexibility and reduced costs - especially for conditions that don't require an extensive physical examination. Telehealth is not just for remote communities anymore", explains Romain Bonjean, CEO and Founder.
KPMG predicts that as a result corporate real estate needs will change, with assets being repurposed or reduced. A shift from the city to the suburbs is anticipated. Tenants of struggling leisure, retail and hospitality businesses have already been seeking rent relief. It predicts a prolonged economic downturn will see further problems, putting increased downward pressure on commercial rents.
“Working remotely during the coronavirus crisis has quickly become the new norm, and one that won’t dissipate quickly – rather, remote working (both part-time and full-time) will rise across all industries. This will include industries such as financial services and the public sector, which have typically been office-bound and challenged by remote working at scale.”
Macquarie has also predicted an asset valuation downturn of 5-15 per cent. It forecasts Sydney office market vacancy rates, currently under 5 percent, reaching 11 percent by 2023. They note that: "in prior downturns a 1 percent change in vacancy resulted in a 6 percent change in rents. As a result, we expect net effective rents to fall about 15 percent to 25 percent, led by rising incentives."
At the same time there will be a renewed focus on occupational health and safety, with required upgrades such as contactless technology, anti-bacterial fabrics and finishes, and higher-level sanitation required. This may drive investment in technologies such as thermal intelligence solutions to screen potentially sick staff and visitors.
Overall, the reduction in utilisation, and subsequent fall in rents, means a re-prioritisation of costs. Lower degradation, due to lower utilisation, may appear as a possible benefit, but the lowered investment curve also means a need for tighter control on overall budgets. Asset Managers will need to control costs better with optimisation. As utilisation falls, how should they prioritise?
KPMG predicts a prolonged economic downturn will see further problems, putting increased downward pressure on commercial rents.
Driving efficiencies with technology
Technology is a fundamental way to drive more efficiencies in asset management. With the right data, managers can make better decisions to help utilities balance costs, risks, opportunities and performance. With the growth of the Internet of Things (IoT), data collection can be automated, taking thousands of data points from all over a building and updating this information in real time.
Through artificial intelligence, this data can be processed to generate insights about cost-efficiency as well as forecasting long-term costs and improvements. Maintenance, repair, security and other budgets can be planned more precisely. Instead of taking a traditional, calendar-based approach to maintenance, managers can be proactive and have a preventative strategy.
Machine learning takes this a step further by analysing previous and current data to identify correlations between existing performance and potential malfunctions. For example, elevators may generate more heat, friction or noise ahead of a breakdown. When this pattern is observed across several elevators it can be used to fix other ones before they hit critical failure. A task as simple as lubricating machinery may prevent an outage, as well as saving time and money.
Similarly, building intelligence can detect under-utilised areas where there may be capacity for more usage, or alternatively potential to optimise insurance costs based on lower traffic.