Evan Lazar is Co-Chairman, Global Real Estate, Global Vice Chair, and Chairman of the Europe Board for Dentons. We spoke to Lazar from his home office in Prague about how his firm has responded to the COVID-19 crisis and to gain his perspective on how the crisis has affected the real estate industry in CEE, and on what he expects the long-term consequences of the crisis to be, both on the economies of the region, and on the legal industry in particular.
CEELM: To start with, how have you been coping with the lockdown, and how has this impacted on your work as a lawyer?
Evan: Like everyone, our primary focus has been to make sure all of our people stay safe and well. The lockdown has necessitated new working conditions. Luckily, as a result of our investment in technology and innovation over the years, and the amazing efforts of our IT team, we transitioned seamlessly to online working within a matter of days. We have continued to meet client needs without interruption.
Prior to the crisis, l personally traveled very extensively to meet with clients, attend negotiations, and meet with colleagues around the world. While meeting online is not the same as meeting in person, I am still having regular calls and videoconferences with the same clients and colleagues - and perhaps even more regularly than before.
CEELM: As a real estate lawyer, what effect do you think the crisis will have on the CEE real estate market this year, and what do think will be the longer-term repercussions?
Evan: The impact on the investment market for this year will largely depend on how the pandemic plays out. Will there be second or third waves of contagion? When will business and tourism travel resume? How quickly will economies start returning to normal?
My colleagues and I recently hosted a virtual roundtable for top real estate investors in Europe. Interestingly, they mentioned that since many countries in CEE have so far been successful in limiting the spread of COVID-19, combined with the strong growing economies, the markets could bounce back quicker than in some countries in the West.
They also pointed out that the effect will be different on the different real estate sub-sectors. Logistics facilities focused on e-commerce will certainly be the least affected. Data center properties will probably come out unscathed, and they might actually end up being worth more than before. There might be some impact on residential real estate but hopefully not much. There is a bit of debate about office space. Some believe that when people get used to home office, companies might not need as much space, while others point out that in the age of social distancing, open-concept offices may not be very practical, so companies might actually need more space. Retail and hotels will take a bit longer to recover, but shoppers are gradually returning to their favorite stores and travelers will start to travel again.
CEELM: While many countries in our region are starting to relax lockdown measures, it is clear that the world has changed. What do you think the “new normal” will look like?
Evan: First, it is clear we need to be prepared for some form of economic slowdown. I will leave it to the economists to debate how long it is going to last and whether it will be a v-shaped, u-shaped, or w-shaped recession. Regardless, we can all agree that there will be a bumpy road ahead.
In the new normal, technology is going to play an even more prevalent role than it does today. Whether we are talking about remote collaboration technology, apps to track cases of infection, new e-commerce sites, or other technological innovations, our world is becoming more and more virtual.
We will see the pendulum swing away from globalization towards nationalism, as countries seek to protect local industry and companies seek to minimize supply chain risk. For the medium term at least, I think we will see a reduction in international travel – even after borders open – as tourists exercise caution and companies seek to reduce expenses.
From a societal point of view, many see COVID-19 as wakeup call. The pandemic has caused us to question our priorities. In the aftermath of the crisis, people will expect companies to be more socially responsible with regard to taking care of workers, protecting the environment, paying their fair share of taxes, and giving back to their communities.
CEELM: What will the new normal mean for law firms and their clients?
Evan: Necessity is the mother of invention, and for us at least, the pandemic has been a catalyst for transformation – accelerating initiatives that we had already been working on. The same goes for many of our clients. The most obvious example is digital transformation: the pandemic forced us to speed up the adoption of new technology and processes. Just a few months ago, we were beginning to experiment with virtual meetings of 1000+ participants – now they are the norm. Likewise, flexible working has been on the agenda for some time, but the last couple months have proven beyond a doubt that our people are just as productive (or more so) when working from home. So legal issues related to technology, such as data privacy and IT security, will be top of mind going forward.
Governments have stepped in to offer companies much-needed support packages, but there are always strings attached. To fund these support measures, governments will be taking a much closer look at taxation. What does this mean for our clients? Be prepared for an additional compliance burden across the board.
The impact of the crisis will be almost universal, so financing and cash-flow management will be at the forefront of the challenges ahead. Our clients, their legal teams and their banks will need to come up with creative financing structures. In the more severe cases, we can expect a bigger demand for restructuring and insolvency services.
CEELM: What do law firms need to do to survive the crisis and succeed in the new normal?
Evan: Law firms need experienced leaders who are focused, forward thinking, and agile. They need to take quick, but balanced and measured actions to ensure ongoing resilience. At the same time, they need to have a clear strategy and to stick to it!
This is a time for solidarity, so lawyers need to keep close to clients and stand shoulder to shoulder in the difficult days ahead. Building trusted relationships will be more important than ever. This is about more than good legal advice. It is about taking the time to check in on a personal level. It is also about demonstrating solidarity with our people by caring about their wellbeing, and contributing to the community through pro bono or other charitable initiatives.
CEELM: For some younger lawyers, this is their first experience with an economic downturn. As an experienced leader, what lessons from the 2008 global financial crisis would you share with your younger peers?
Evan: My first lesson would be this: “Don’t panic – every crisis will pass – but at the same time, be prepared.” Back in 2008, I observed a time lag from when the crisis hit to when clients reacted, and then to when law firms started to see the effects. First comes a slowing of new transactions, then a slowing of billable hours, then last, a slowing of cash collections. As things improve, the reverse happens … and it takes a while for collections to improve.
My second lesson would be: “Don’t let a good crisis go to waste!” Use the downtime to focus on personal resilience, get closer to clients, and update your skills.