It has, it is safe to say, been a year like no other. There cannot be a section of society or the economy that has been untouched by the Covid-19 pandemic.

Jackie Oakes

Jackie Oakes

Businesses shuttered, workers furloughed, doing their best to do their jobs from the kitchen table or working on the frontline – be it in care services, supermarkets or on public transport – and putting themselves in danger for the greater good… the impacts of the pandemic have been all pervasive.

Throughout the pandemic, the real estate sector has again demonstrated its resilience, weathering the various challenges of the past year and showing its ability to adapt and survive.

And yet, as the following pages make clear, the effect of the pandemic on the industry has still been devastating. The retail and leisure sectors were heaviest hit, but the office market also suffered badly.

Residential appears to be booming after being shut down entirely during the first wave of the virus, but a collapse may well be on the cards once the stamp duty land tax holiday comes to an end.

That is unlikely to have much of an impact on the high-end London market, however, which occupies a very different space and has performed relatively well. Only the logistics sector seems to have actually benefited from the pandemic.


However, what has been truly remarkable has been the way in which many property companies have pivoted their business models to either keep going or prepare for the post-Covid world, which few seem to believe will be unaffected by the events of the past year.

Doubtless, we will return to the office at some point, but with what regularity and for how much time is still an open question and property investors are already starting to respond by refurbishing and reinventing office space, strategies that have tax implications.

Funds restructure

Many property funds have also started to restructure. In part, that is down to recent changes to capital gains tax, which make it less tax efficient to set up structures in offshore jurisdictions.

But it is also in response to the fact that the types of assets funds are acquiring has shifted. The structure that worked for a portfolio of city centre retail assets may not be appropriate for one made up of suburban flexible offices, not least when it comes to tax efficiency.

So, there is no doubt that it has been a tough year, but as the UK’s vaccination programme proceeds at pace and the economy starts to open up again, it is clear that real estate has found creative ways to keep the show on the road. And getting the structure right and thinking about the tax implications early remain key.

Jacqueline Oakes, partner, assurance and business services and head of real estate at Smith & Williamson