The Commercial Property Market Amidst COVID-19 Challenges

By Alexi Casey

As a consequence of the Coronavirus crisis, commercial property owners (industrial, retail or office units), private investors and pension funds will find themselves facing a range of challenges. Following the new information published by the Office for Budget Responsibility (OBR), it is becoming clear that these challenges will be extreme. However, for those who adapt quickly, there could be a whole host of new opportunities.

With the value of commercial buildings, such as shops and office spaces, predicted to plummet by almost £230b in 2020 (equating to a 14% drop from its current value), it seems that the Work From Home regime could have a severe impact on the commercial property market. Although the Brexit vote knocked this industry just four years ago, the substantial cohort of employees ordered to work from home at the beginning of the national lockdown has ultimately led to this prediction by the OBR; with the demand for office and retail space rapidly declining.

As for time efficiency and working power, there have been some surprising outcomes from the Work From Home strategy; many employers are realising that this is an approach that could easily be continued. Employers are likely to re-evaluate their current requirements regarding office space, and this could lead to structural changes in the form of increased e-commerce. Notable firms such as Vodafone, Morgan Stanley and Barclays have announced that they will continue with this strategy. As a result, businesses reliant on employees and commuters (mainly cafes and food vans) are likely to be impacted. All of this could lead to vast unemployment and the decreasing value of high street property.

With the shift to working from home allowing workers to support local businesses, Hew Edgar, Head of UK Government Relations, proposes that the market should be ‘addressed as a whole’ to lessen the drop in traffic in city centre hubs.

Wales has similarly experienced a decline in occupier interest in commercial property, with tenant demand for office space falling by 44%. The current prediction for rents is equally negative across Wales. Naturally, such a fall has also been witnessed in Scotland, leading The Royal Institution of Chartered Surveyors (RICS) to advise that office space should be converted into housing. Whilst being a more ‘green’ option, allowing residents access to nearby facilities (once used by employees) and improving community wellbeing, this transformation would ultimately lead to significant unemployment and business closure.

Another solution for the drop in demand for office space could come in the form of industrial property, particularly for manufacturing and warehouse facilities. In order to satisfy the recent increase in online retail traffic, principally through online shopping, warehouses and logistics solutions will ultimately benefit from the post-Coronavirus fallout. This recent growth with regards to e-commerce will likely benefit the move towards recovery in the industrial and commercial sectors. Indeed, such sectors have already begun to show signs of improvement and even restoration.

It seems unclear if and how the commercial property market will eventually adjust to such monumental change in the economic environment. Instruction from RICS indicates that substantial adjustments lie ahead.


  • The Coronavirus crisis is likely to replace Brexit in the sense that every student will be eager to discuss its impact when asked about commercial awareness. In order to stand out against other candidates, look at the firm’s involvement with commercial property and the types of deals it conducts. How would these, specifically, be impacted and how could the firm minimise the impact of the changes mentioned above on their success in this sector?

  • How could the firm adjust its approach to commercial property (for example through the recommendations by RICS)?

  • After conducting research on the current commercial property climate, try to establish your own view on how the firm could advance following this shift in demand.


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