FTSE-indexed real estate firms issued eight profit warnings during the second quarter of the year as a result of the COVID-19 pandemic.
According to EY’s latest Profit Warnings Report, including the number of warnings issued during the first quarter of the year, the total number during the first half of 2020 was 24, representing just over a quarter (26%) of the sector.
During the first half of 2019, five FTSE-indexed real estate companies issued profit warning.
The FTSE Real Estate sector breaks down into FTSE Real Estate Investment and Services and FTSE Real Estate Investment Trusts (REITs), with the former issuing a third of the warnings and the latter issuing nearly a fifth of the warnings, the report said.
Helen Pratten, EY strategy and transactions partner, said: “Profit warnings decreased in the second quarter compared with the first quarter but remain high. COVID-19 has been cited in all real estate profit warnings as the pandemic exposed underlying structural weaknesses and exacerbated existing challenges.
”Vulnerable real estate sectors, such as retail, have seen accelerated disruption.”
Lisa Ashe, UK restructuring partner at EY said: “The size of a business appears to offer no protection, with more FTSE 350 companies than ever issuing profit warnings.
”Boards need to guard against complacency and be ready to take swift and decisive action to reshape their business to face a different future than they imagined just a few months ago. Companies could find that previously healthy parts of their business are no longer profitable. This is a pivotal moment for UK plc.”
Pratten said: “The challenges ahead for the real estate sector include not only the wider economic uncertainty; COVID-19 has caused businesses to reassess their real estate needs. Bricks and mortar retail is changing, and it is uncertain when students will return en masse to universities or when hospitality will recover.
”Whilst a buoyant and successful future is envisaged, the sector must plan and adapt whilst navigating the short-term.”
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