One can only imagine the economic cost, especially as a return to business as usual seems some time away. RBS has said that its 50,000 office workers will not need to return this year, and the knock-on effects are significant – Stagecoach this week said that it does not expect demand for public transport to return to normal for “some time”; Transport for London has already required emergency funding of £1.6bn, and it’s not inconceivable that a further bailout will be needed if the capital remains a ghost town for many months longer. And a raft of service industries supporting the armies of City workers are in trouble – City favourite Pret a Manger said weekly takings had fallen to 15 per cent of normal levels.
The government is understandably spooked and recently urged workers to return to the office, at odds with the guidance from their scientific advisers. Companies seem to be paying more attention to the latter and their own nervous staff, though, and it is unlikely that RBS will be the only large financial institution whose employees continue working from the kitchen table for the foreseeable future. Even before the crisis many banks were already planning to downsize their London presence – and as these valuable tenants head elsewhere landlords must be quaking in their boots, especially after a development splurge that has transformed the City skyline. Such construction as measured by the so-called ‘skyscraper index’ has once again proved a powerful end-of-cycle predictor.
The big beneficiary of this shift is, of course, the technology industry, as the soaring Nasdaq tells us. But as my colleague Megan Boxall recently put it in our recent webinar on US investing, we should be wary of companies that may be borrowing their growth from the future. Microsoft boss Satya Nadella said the software giant had seen “two years’ worth of digital transformation in just two months”, and it’s a similar story across the tech industry. The big question, of course, is how they grow from here – everybody who needs videoconferencing must surely have it by now. And at some point, many workers will want, like us, to return to their offices, and the lockdown-driven surge in technology usage may return to more pedestrian levels. Empty streets may not be here forever, and just as technology shares may have rallied too far, so property shares may have gone too far the other way. Some Reits are trading at half of their net asset value, reflecting fear of a demise that, like much in the current crisis, may be greatly exaggerated.
