Wait In Line: How The Vaccine Rollout Strategy Impacts Real Estate's Recovery


Photo Courtesy of USC News.

The first vaccines for the coronavirus have been shown to work, and are at various stages of approval in the U.S. and UK. Now these countries face a question fraught with practical, moral and ethical difficulties: Who gets the vaccine first?


The answers public authorities come up with in the coming days and weeks, and the rollout strategy they decide on, will have huge health implications — and equally huge implications for the economy and different sectors of commercial real estate.


“Getting health and essential workers vaccinated helps to stabilize the economy and stop the bleeding,” New York University Department of Population Health Professor of Bioethics Arthur Caplan told Bisnow.


On both sides of the Atlantic, senior living and health care are the sectors that will see their users get the vaccine first, but the practicalities of rolling it out could mean the impact for senior housing is initially limited.


The allocation strategy the U.S. is on the verge of choosing could help the battered restaurant and hospitality sectors. But on both sides of the pond, a mass return to the office could still be some way off because of the choices being made as to who will get the vaccine first. More broadly, the vaccine could take some time to really help the economy off its knees.


The economy has very much been a secondary concern when it comes to formulating a plan for vaccine distribution, those involved in the formulation of the strategy told Bisnow. If the health crisis is stabilized, the economy will follow quickly, the thinking goes.


But some health economists argue that more nuanced thinking about who gets inoculated and when could provide a big boost to other battered areas of the economy like tourism and university education, which in turn could have big real estate implications.


Who Is First In Line?


The U.S. and UK have picked different strategies when it comes to who gets the vaccine first. Experts in the health and policy field said there is no right or wrong answer, but there might be different impacts for the respective countries.


Both have decided to first vaccinate the staff and residents of long-term senior care facilities, like nursing or care homes, since such a high proportion of cases and deaths have been found in these facilities, and the residents are so susceptible to COVID-19.


But after this, the strategies diverge. To put it simply, the UK is prioritizing people by age, starting with those older than 80 and working backward in five-year tranches. The U.S., on the other hand, is very close to formalizing a strategy that will prioritize "essential workers," a group totaling more than 80 million people. It includes health professionals, other emergency services workers like police and firemen, teachers and education professionals, and a whole slew of other professions.


Boiled down, the U.S. has chosen to prioritize equity, the UK simplicity.


“One of the attractions [of the strategy of prioritizing essential workers] has to do with equity,” Vanderbilt University School of Medicine Professor of Preventive Medicine and Infectious Diseases William Schaffner told Bisnow. “We’re aware that many people that encompass that category of essential workers are people of color and of lower economic standing, with the data showing those people are disproportionately affected by COVID-19. It’s attractive from the point of view of medical ethics.”


In the U.S., the Advisory Committee on Immunization Practices, part of the Centers for Disease Control and Prevention, is responsible for formulating a strategy on how the vaccine should be allocated, with individual states then free to follow its advice.


Schaffner is a member of the committee’s panel of experts, but he is no longer a voting member when it comes to its strategy. He said the modeling used by the ACIP showed that allocating the vaccine by age band, like in the UK, or to essential workers first like in the U.S., would ultimately prevent the same number of deaths.


Targeting essential workers was done for reasons of equity, but it lacks when it comes to simplicity. Allocating by age group is far easier.


Stop The Bleeding


Schaffner said that the ACIP “noted with great interest” the potential economic impact of the rollout strategy it chose, but economic scenarios of different plans were not modeled in great detail. He said the economy wasn’t part of its thinking when the committee decided on the plan it would recommend — its role was to focus on the best outcome from a health perspective.


But he and others argued that vaccinating essential workers first will have a positive secondary impact on the economy.


“The more quickly you get them protected, the more quickly the economy will stabilize and ultimately recover,” Schaffner said.


But NYU’s Caplan warned that the vaccine could take some time to have a real impact on the economy.


“I think the market and the stock market have been too optimistic [about the vaccine’s’ impact],” he said. “I don’t think the economy will come sailing back next year. We’ll still be social distancing for a long time.”


A microcosm of the reason why can be found in the sector that will be first in line for the vaccine — long-term senior care facilities.


Last week, the UK became the first country in the world to approve the widespread use of a coronavirus vaccine, developed by Pfizer and BioNTech.


It was undoubtedly a moment of joy and optimism when the first doses were administered this week after all the bleak news of 2020. But the reality of distributing the vaccine to the care home staff and workers entitled to receive it is already highlighting the challenge of administering it.


The need to store this first vaccine at ultracold temperatures makes it hard to administer outside of sites with adequately cold storage, sites that are in short supply.


“This first vaccine is a bit like Friends Reunited — it was OK, but you were waiting for something better, like Facebook, to come along,” Aegon Asset Management Head of Specialist Funds Anne Copeland, a long-term investor in care homes and health care property in the UK, said. “The capacity still needs to be hugely increased before we start trumpeting about successes.”


The vaccine has been shipped from its European factory in Belgium to the UK in large batches, which can’t be broken down and then distributed to individual care homes.


“Staff will be able to travel to wherever they need to go to receive it,” Copeland said. “But it is harder with the sort of vulnerable residents we have, who are not as mobile. You can’t have hundreds of them [standing] there with their arms out and their sleeves rolled up.”


Until more vaccines that are easier to transport and administer are available, the impact on the senior living sector will be minimal, Copeland said.


Such practical difficulties are likely to play out more widely in thousands of individual instances around the world over the coming months. The vaccine is unlikely to bring an end to the restrictions on movement brought about by COVID any time soon, said Caplan, whose book, Vaccination Ethics and Policy, was published by MIT Press in 2017.


The Essential Worker Of Today Has Changed


Once the inoculation of those in the care sector is complete, the U.S.’ attention will turn to essential workers. Those on the priority list for vaccines include a host of positions within commercial real estate, such as residential property managers and leasing brokers, as well as commercial and residential construction workers.


Any difficulties in operating in those sectors will be a thing of the past more rapidly than in other areas.


Just as important for the recovery of commercial real estate is the designation of restaurant workers as essential, as well as anyone involved in food retail. These workers will be in that first, albeit large, wave of vaccinations.


The restaurant sector has been one of those hit hardest by the pandemic, and anything that allows businesses in this area to function more normally, such as the ability to protect staff through vaccination, will be a huge boost to tenants and, as a result, their landlords.


"We'll take every amount of business in any possible way we can and limp through the winter," Cathal Armstrong, the chef/owner at Washington, D.C., restaurant Kaliwa, told Bisnow in October. "That's what everyone's going to do, and pray for a vaccine in the spring."


Warehouse and logistics workers are also deemed essential and will get the vaccine ahead of nonessential workers. The sector has thrived during the pandemic; occupiers have needed more space as ever more retail demand moves online, and investors have piled in to a sector with the wind already in its sails.


The news will be reassuring to the actual staff in warehouses, where outbreaks have been common and labor conditions highly dangerous during the pandemic.


Very much not on the list of essential workers is white-collar office staff. Getting people back into offices is not a huge priority.


Schaffner, the medical director of the National Foundation for Infectious Diseases, pointed out that the vaccination of educational staff, such as teachers or nursery and day care staff, would be vital to help the economy recover, as it would remove the need for parents to stay at home to look after children if schools were shut.


This could have a positive knock-on effect for workers of all types, especially women, who research has found have been particularly adversely affected by increased child care burdens during lockdowns.


But the fact that office workers are at the bottom of priority lists on either side of the Atlantic means government advice to continue working from home where possible seems likely to be in place for the foreseeable future.


Who Targeted Vaccinations Indirectly Help


Some specialist health economists have said that the rollout of the vaccine could be more nuanced, targeting specific sectors of the economy to better aid the general recovery of a nation’s finances.


“The UK has 300 million vaccine doses ordered for a population of about 65 million,” Oxford University Professor of Health Economics and Director of the Health Economics Research Centre Philip Clarke said. “There is an argument that instead of holding surplus doses back, you could use them to benefit the economy.”

Clarke pointed out that the UK had gone for the strategy of vaccinating by age group because of its simplicity. But within that, he argued that those who need to go to work because they are unable to do their job from home could be prioritized, particularly service workers in hospitality and retail.


Beyond this, targeting workers or consumers in certain sectors could be beneficial.


“You could think about how you might benefit British industry,” he said. “Tourism is a major industry here, so it might make sense to vaccinate tourists coming in to help that industry get off the ground. Another industry that has really suffered is higher education. I might be biased, but that is a big export industry, so vaccinating overseas students to encourage them to come here could have a huge benefit.”


Such a strategy would have a clear benefit for the real estate sectors that rely on overseas tourists and students, such as London hotels or student accommodation.


Time Is Of The Essence


Ultimately, everything will come down to the speed and efficiency of the rollout.


“A situation where the vaccine program proves more effective than expected and eradicates the virus more quickly poses an upside risk,” UBS Asset Management said in a report outlining the 10 key questions for the real estate sector in 2021.


Alternatively, a downside risk stems from vaccines not being quickly and widely administered, UBS said, due either to delays in manufacturing or distributing and administering them at scale.


“If it only takes a few months, it doesn’t matter where you are in the queue,” Clarke said. “If it drags on for six months or longer, then you will start to see arguments about who is getting access.”


In that sense, the arguments about who gets vaccinated first could be more of a hindrance than a help to achieving the aim of making a population as safe as possible when it comes to COVID-19.


“I have a rule that whenever there is a long list of priorities to adhere to, then the vaccine stays in the refrigerator,” Schaffner said. As long as the health benefits are the same with different strategies, “there is no right answer or wrong answer. Just choose one.”


As the U.S. and UK watch their differing strategies play out, the recovery will ultimately come down to ensuring tens of millions of people taking effective vaccines. What is true for the health of the nation will be true for the health of the economy.


“Vaccines don’t save people, vaccination does,” Shaffner said.


Source: 2020 BisNow.

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