An instant economic crisis: How deep and how long?

Analysis of a range of economic data tracks the worsening effects of the pandemic in the West—and the cautious reopening of social and economic life in China.


The human tragedy of the COVID-19 pandemic continues to deepen, with the heaviest toll now seen in Europe and the United States. Although testing remains limited, the number of confirmed cases of the virus worldwide has exceeded 1 million, and more than 70,000 have died. The United States, Italy, and Spain have the most confirmed cases and highest death tolls. Hundreds have died in each of the past several days in Britain and France. Healthcare systems in these relatively wealthy countries are strained beyond capacities, with shortages of protective equipment for health workers and ventilators for afflicted patients contributing to infection and mortality rates. Data from China suggest that the outbreak has been largely contained there; the government is cautiously reopening economic activity but is wary of the potential for new cases.

The restrictions applied to populations to stop the spread of the virus—including quarantines, stay-at-home orders, business closures, and travel prohibitions—have produced massive fallout for the world economy. The data to measure these effects are still arriving; available indicators reveal conditions have dramatically darkened since February. An early arresting statistic was that 3.3 million Americans applied for unemployment benefits in the week ending on March 21. The following week, 6.6 million applied. Until these two shocking totals were triggered by this crisis, the highest number of unemployment applications ever received in one week was 695,000 (in 1982). Around the world, stock markets lost approximately one-third of their values between February 20 and the end of March (Exhibits 1 and 2).


East and West—yesterday and today

The reality today is that the Chinese economy has begun to reopen as the West shuts down. The most recent edition of The Jeeranont’s Global Economics Intelligence (GEI), released to subscribers on March 31, reveals the damage the Chinese economy experienced in January and February, when it was at the center of the outbreak.1 Forward-looking indicators for manufacturing and services fell to unprecedented lows; exports contracted 17 percent compared with those in 2019. For Europe and the United States, the data were still largely positive in advance of the coming storm. In Europe, a moderate pickup in growth experienced early in 2020 has since been stopped in its tracks, as large employers curtail operations and lay off workers. Indicators for India presented in the GEI report were largely positive as well, but they are set to fall steeply, as the entire nation has been under a stay-at-home order since March 25.

Alongside the steps taken to stop the spread of the virus, governments and central banks intervened in economic life with mitigating measures of increasing force. The financial markets responded positively but remain unusually sensitive to fluctuating medical and political developments. Among the enormous relief programs being enacted to sustain companies and citizens during the lockdowns, the largest of the large is the US stimulus package, valued at more than $2 trillion. The European Central Bank (ECB) announced €870 billion in quantitative easing; in an effort to forestall a credit crunch, ECB has also prohibited eurozone banks from paying dividends to investors or buying back shares until later in 2020. The European Parliament released €37 billion to support small and medium-size enterprises (SMEs) and the healthcare sector. The People’s Bank of China has taken steps to supply the banking system with an additional 550 billion renminbi (around $78 billion) in liquidity. The US Federal Reserve Board brought its policy rate near zero (0.00 to 0.25 percent) and announced $700 billion in quantitative easing.

Amid the fast-moving pandemic and the policy responses, economic forecasting has become an unusually uncertain enterprise. The Organisation for Economic Co-operation and Development, for example, canceled the March release of its forward-looking composite leading indicator. Forecasts in this period must be looked upon with robust skepticism. Moody’s Investors Service, one of the most respected forecasting agencies, cut its 2020 GDP-growth estimate for India to 5.3 percent on March 17 because of the expected effects of the pandemic. Ten days later, it cut the estimate to 2.5 percent.2 The The Jeeranont Global Institute has taken a different approach, developing scenarios that help conceptualize the course of the pandemic and potential paths to public-health and economic recovery (Exhibit 3). The scenarios consolidate assumptions into a range of estimates of the GDP impact of lockdowns on consumption and economic activity.


From expansion to contraction and back again?

The logarithmic progressions of new COVID-19 cases indicate that the curves in the East (China and South Korea) are now essentially flat. The curves are flattening in Iran, reaching an apex in Western Europe, and yet climbing in the United States.3 The course of the pandemic and the human tragedy it is causing are far from exhausted. Measures to limit its deadliness will remain in effect in many countries, including in Europe and North America, for weeks to come. Economic recovery can only follow the recovery of public health. The March GEI report, coupled with subsequently released economic data, does, however, suggest a pattern—yet embryonic and fragile—toward that recovery.


The global Purchasing Managers Indexes (PMIs) for February (released in March) mainly reflected the preoutbreak economy. PMI readings above 50 indicate expanding manufacturing or services activity; those below 50 indicate contraction. February PMIs in China revealed dramatic contractions. Services are especially hard hit by quarantines and physical-distancing measures. In China, an expansionary reading in the Caixin Global services PMI of 51.8 in January went into free fall, bottoming out at 26.5 in February—the lowest reading in the history of that indicator.

Readings for March in China’s official PMIs (a different index) show, however, a significant recovery in both manufacturing (52.0 in March, from 35.7 in February) and services (52.3 in March, from 29.6 in February). As the Chinese economy hopefully climbs out of the COVID-19 hole, the US and eurozone economies are still descending into it. Recently released IHS Markit PMIs for the United States show a moderate contraction in manufacturing (48.5) and a historic fall in services, to 39.1 (from 49.5 in February). A similar pattern is observed in the eurozone, with the manufacturing PMI retreating from 49.2 in February to 44.5 in March and the services PMI falling disastrously, from 52.6 in February to a never-before-seen 28.4 in March.

The time delay for trade data is longer than for the PMIs. The most recent readings from some indicators are based on data for January, when trade momentum (imports plus exports) was slowing moderately in most surveyed economies. The CPB World Trade Monitor showed that trade volumes shrank in January (–1.2 percent), after rising in December (+0.4 percent). The Container Throughput Index, which measures traffic in most major ports globally, fell 10 percent in February (to 102.5, from 113.4 in January). The reading aligns with reports of subdued activity in US Pacific ports and suggests the disruption in US–China trade caused by COVID-19.

Preoutbreak inflation indicators (for February) showed easing prices for both consumers and producers in advanced and developing economies. Commodity price indexes provide more recent data, showing prices falling in March, especially in the energy sector. Oil prices have plunged below $25 (Brent). The steep fall was precipitated by two coinciding events: Russian–Saudi competition ramped up production just as pandemic-fighting restrictions on movement depressed demand. Inflation expectations, as expressed in the yield spread between US Treasury inflation-protected securities (TIPs) and Treasury bills of the same maturity, have fallen because of the falling commodity prices and rising fears of recession. The euro and the yen gained in March against the US dollar, while other major currencies depreciated significantly.

The price of gold was volatile in March, lately rising above $1,600. Volatility indexes have generally spiked, hitting readings not seen since the financial crisis of 2008–09 (Exhibit 4). Yields on government bonds, meanwhile, rose significantly in March in most surveyed economies, especially those of Brazil and Italy.


Economic intervention

Governments and central banks have scrambled to apply accommodative monetary policies and assemble stimulus packages to sustain businesses and individuals during lockdown periods. China’s policy response was initially modest. In mid-March, the People’s Bank of China released financial institutions from liquidity requirements totaling 550 billion renminbi. Reports of a March 25 Politburo meeting suggest that fiscal-deficit limits will be lifted and national and local bond sales increased. In Europe and the United States, the policy measures have already been clearly described.

The United States

The US Congress came together to pass a stimulus package of unprecedented size, with provisions to support businesses and individuals. Around $500 billion is aimed at aiding citizens. Adult Americans making less than $75,000 per year will receive a single payment of $1,200. The sum will be higher for those with children and lower for those with higher incomes. The package also expands unemployment benefits, lengthening coverage for up to 39 weeks and supplementing state payments with a weekly federal payment of $600. Previously ineligible workers, such as part-time workers and freelancers, will become eligible. Some requirements on retirement funds and student loans are to be relaxed.

To businesses large and small, $867 billion is to be provided. Cargo and passenger airlines will receive an additional $58 billion support package, with the stipulation that no employees are laid off before September 30. Aircraft manufacturers could receive support under a separate national-security provision. For industries, a $500 billion liquidity fund has been set aside. The US Small Business Administration will administer a fund of $350 billion to provide SMEs with partly forgivable loans on favorable terms for payroll, rent, mortgage, and utilities. Hospitals are to receive $100 billion and state and local governments $150 billion in aid.

The stimulus came on top of attempts by the US Federal Reserve to bolster crumbling financial markets. The efforts included an announced $700 billion quantitative-easing program and two policy-rate cuts, on March 3 and 15, which brought the effective rate to zero. A measure of investor confidence did not return, however, until the passage of the stimulus. The S&P 500, for example, climbed 15 percent in the final week of March.


Measures to limit the pandemic’s deadliness will remain in effect in many countries for weeks to come. Economic recovery can only follow the recovery of public health.


The European Union

For many weeks, Western Europe has been at the center of the crisis. In response to the economic fallout of the pandemic, ECB announced two quantitative-easing packages in succession, the first worth €120 billion and the second totaling €750 billion. Speaking of this unprecedented intervention, ECB president Christine Lagarde stated, “There are no limits to our commitment to the euro.” The European Union announced the Coronavirus Response Investment Initiative, which is to provide €37 billion in liquidity relief to SMEs and the healthcare sector. The European Commission proposed softening fiscal rules, including increasing limits for state aid to companies affected by the crisis to as much as €800,000 per undertaking in direct grants.

The European Commission also created a strategic stockpile of medical equipment, including respirators and medical masks, and launched a joint public-procurement program to alleviate the shortage of medical supplies within the European Union. Along with the response by central European Union and eurozone authorities, individual member states have also implemented their own fiscal measures in an effort to stabilize the markets and assist companies and workers in coping with the drop in the demand for work.

Toward the return

In recent weeks, restrictions on movement and travel have been tentatively relaxed in China, as the number of new infections drops toward zero. Millions of migrant workers are returning to the country’s major cities, and workplaces are restarting operations. Employees are temperature tested when they come to work and must show a green national-health-code designation. Most receive this information as a QR code on a mobile platform designed by Alipay. A green tag indicates good health; yellow and red tags require one- and two-week quarantines, respectively. Evidence indicates that these rules are strictly enforced and that life, even in Wuhan, has begun returning to a semblance of normal.


The experience in China offers important lessons for nations still grappling with this grave public-health crisis—both in the rapid, forceful containment of the outbreak and in the careful reopening of social and economic life.

Commercial real estate must do more than merely adapt to coronavirus

COVID-19 is a humanitarian challenge that will have lasting effects on how people live, work, and play. By acting today, real estate leaders can best serve end users and ensure their own viability.


In a matter of weeks, the lives of so many have changed in ways they had never imagined. People can no longer meet, work, eat, shop, and socialize as they used to. The working world moved rapidly from business as usual to cautious travel, office closures, and work-from-home mandates. Instead of traveling and going out to eat at restaurants, consumers across the world are tightening their purse strings to spend only on essentials—primarily food, medicine, and home supplies—and getting these delivered much more often.

Physical distancing has directly changed the way people inhabit and interact with physical space, and the knock-on effects of the virus outbreak have made the demand for many types of space go down, perhaps for the first time in modern memory. This has created an unprecedented crisis for the real estate industry. Beyond the immediate challenge, the longer this crisis persists, the more likely we are to see transformative and lasting changes in behavior.

To respond to the current and urgent threat of COVID-19, and to lay the groundwork to deal with what may be permanent changes for the industry after the crisis, real estate leaders must take action now. Many will centralize cash management to focus on efficiency and change how they make portfolio and capital expenditure decisions. Some players will feel an even greater sense of urgency than before to digitize and provide a better—and more distinctive—tenant and customer experience. And, as the crisis affects commercial tenants’ ability to make lease payments, many operators will need to make thousands of decisions for specific situations rather than making just a few, broad-based portfolio-wide decisions.

Most real estate players have been smart to begin with decisions that protect the safety and health of all employees, tenants, and other end users of space. The smartest will now also think about how the real estate landscape may be permanently changed in the future, and will alter their strategy. Those that succeed in strengthening their position through this crisis will go beyond just adapting: they will have taken bold actions that deepen relationships with their employees, investors, end users, and other stakeholders.

The immediate challenge


Over the past several years, real estate investments have generated steady cash flow and returns significantly above traditional sources of yield—such as corporate debt—with only slightly more risk. Since the virus outbreak, however, this reality has changed, and real estate players have been hit hard across the value chain. Service providers are struggling to mitigate health risks for their employees and customers. Many developers can’t obtain permits and they face construction delays, stoppages, and potentially shrinking rates of return. Meanwhile, many asset owners and operators face drastically reduced operating income, and almost all are nervous about how many tenants will struggle to make their lease payments. “Concession” and “abatement” are the words of the day, and players are working rapidly to figure out for whom they apply and how much.

Not all real estate assets are performing the same way during the crisis. The market seems to have pivoted mostly on the inherent degree of physical proximity among an asset class’s users—even more so than on its lease length. Assets that have greater human density seem to have been the hardest hit: healthcare facilities, regional malls, lodging, and student housing have sold off considerably. By contrast, self-storage facilities, industrial facilities, and data centers have faced less-significant declines. As of April 3, by one estimate, the unlevered enterprise value of real estate assets had fallen 25 percent or more in most sectors and as much as 37 percent for lodging (the most extreme example).1 It’s no surprise that—when shoppers avoid crowds, universities send students home, and retailers, restaurants, and hotels close their doors—owning and operating those properties is a less valuable proposition. As such, liquidity and balance-sheet resilience have become paramount.

Behavioral changes that may outlive the crisis

Real estate owners and operators across almost every asset class are considering several potential longer-term effects of the coronavirus outbreak and the required changes that these shifts are likely to bring.

For example, within commercial office space, the multiyear trend toward densification and open-plan layouts may reverse sharply. Public-health officials may increasingly amend building codes to limit the risk of future pandemics, potentially affecting standards for HVAC, square footage per person, and amount of enclosed space. At the same time, just as baby boomers age into the sweet spot for independent and assisted living, fear of viral outbreaks like COVID-19 may prompt them to stay in their current homes longer. It is possible that demand for senior living assets could dampen, or the product could change altogether to meet new preferences for more physical space and more-intensive operational requirements. It is also possible that senior-living facilities could prove they are best able to handle viral outbreaks, accelerating demand.

The COVID-19 experience could also permanently change habits that may affect demand for other real estate assets, such as hospitality properties and short-term leases. Even a short moratorium on business travel could have lasting impact when alternatives such as video conferences prove sufficient or even preferrable. Near-shoring of supply chains may further reduce demand for cross-border business travel, and consumers who are afraid of traveling overseas may shift leisure travel to local destinations.

Consumers forced to shop online because of closed malls and shopping centers may permanently adjust their buying habits for certain categories toward e-commerce. Before the pandemic, consumers were already shifting their spending away from physical stores. This long-term trend may accelerate even faster after the crisis—especially as many previously struggling brands are tipped over the edge into bankruptcy or forced to radically reduce their footprint. Early evidence from China shows some staying power in the coronavirus-driven shift to e-commerce. Within certain product categories where supermarkets or mainstream retailers competed with online retailers, substantial market share could transfer to online players.

The shift to e-commerce may also further boost already high demands for industrial space. Relatively niche asset classes (such as self-storage and cloud kitchens) could see an improvement in their unit economics, as demand density goes up when more people work from home, while other asset classes (such as coliving) may suffer. And universities forced to educate remotely for entire semesters could convince students and other stakeholders that existing tools are sufficient to provide a high-quality education at a lower cost, and a new type of hybrid (online–offline) education could become even more widely embraced.

The depth and breadth of economic impact on the real estate sector is uncertain, just as the scale of human catastrophe from the pandemic is yet to be seen. However, behavioral changes that will lead to significant space becoming obsolete in a post-coronavirus environment seem imminent. Given the potential for transformative changes, real estate players will be well served to take immediate action to improve their businesses but also keep one eye on a future that could be meaningfully different.


How leading real estate owners and operators are navigating the crisis

While the longer-term consequences are difficult to predict, the immediate market consequences of the coronavirus crisis have been made clear—the public market sell-off in certain real estate types has been nothing short of dramatic. All companies, public and private, are working hard to navigate the immediate crisis with respect to staff, tenants, and end users of space, while also facing tough business trade-offs. Most industry leaders seek to strike the right balance between capital preservation and further strengthening their competitive differentiation.

Over the past several years, industry leaders have been diversifying sources of revenue, pursuing digital strategies, and focusing on tenant experience. The COVID-19 crisis has accelerated the need for those strategic changes—and highlighted that those that haven’t yet made such investments will probably need to catch up quickly. For example, while relatively few real estate companies were actively developing or pursuing digital and advanced analytics strategies before the pandemic, such strategies can help with tenant attraction and churn, commercial lease negotiations, asset valuation, and improved tenant experience and operations. Other direct results of the outbreak include the need to meaningfully engage with customers and employees on health and safety in physical spaces.

In the wake of the coronavirus outbreak, real estate industry leaders are taking on a set of common imperatives.

Earning the respect, trust, and loyalty of customers and employees

Above all, owners and operators have an obligation to protect the safety and health of people by all reasonable means. For leading operators, the need to overcommunicate—to both make sure they fully understand tenants’ needs in this moment and help protect everyone in their ecosystem—is leading to some changes in behavior. This may make the practice of communicating as a company-level brand (rather than property-level brand) more common, speeding up an existing market trend. In B2B environments, such as offices and retail stores, CEOs and management teams may join asset managers and property managers and engage directly with tenants.


They should follow up quickly on the actions they have discussed with tenants. Not only are such changes the right thing to do—they’re also good business: tenants and users of space will remember the effort, and the trust built throughout the crisis will go a long way toward protecting relationships and value.

Centralizing cash management

Real estate has always been highly decentralized: many important decisions that impact cash flow have been made at the property level. But given the uncertainty around the duration and depth of this crisis, top management is now providing more centralized direction on property-level cash management in addition to company-level balance-sheet decisions and credit lines. All levels of management—including those at the property level and company level—are beginning to identify efficiency levers and when to pull them based on the underlying performance of properties and the business as a whole. In the past, few properties and companies took a lean-enterprise mentality toward capital and operating expenses.


Those that do adopt lean practices and eliminate inefficiencies, however, can buy themselves a little more time to work through uncertainty. But creativity can also be employed more often, as not all cash-creating activities need to involve cutting costs. For example, some developers engaged in residential sales are looking into innovative ways to liquidate new inventory, such as lease-to-own programs and financing partnerships.

Making tailored, informed decisions—particularly in commercial lease concessions

While it may be tempting to make reductive assumptions about the coronavirus outbreak’s economic impact, the corresponding policy responses at city, state, and federal levels will not be uniform across real estate portfolios. Even within a single asset, needs will vary among tenants. Thanks to the richness of available behavioral data, select real estate leaders will use analytics to generate fact-based insights on local epidemiological and economic scenarios, what is happening to competitive assets around a property, and the impact of the crisis on individual tenants. These perspectives can inform highly targeted decisions, rather than a one-action-fits-all-tenants approach.

Nearly every landlord is preparing for the effects of the downturn, when scores of tenants across asset classes will ask for lease concessions or abatement. While a single policy across all tenants and properties may be easier to implement, decisions must be made for each situation, starting with a consideration of tenants’ safety and well-being. In the office sector, factors such as price point in the market, tenant-renewal probability, tenant-default probability, local regulations, building appearance due to vacant spaces, and potential reputational risks should inform individual decisions. Few real estate players have information about these on hand, and even fewer have the right tools, processes, and governance to make decisions.


For instance, they rarely have detailed protocols in place for what can be decided at a property level versus what should be decided centrally, as well as what tools can be used for leasing or which asset-management professionals must make these tough decisions daily. Properly implemented, a set of clear protocols along with structured, fact-based decisioning will ensure fairness and procedural justice for tenants and help operators communicate their actions with key stakeholders, including tenants, investors, and lenders.

Taking the digital leap

Before the crisis, the real estate industry had been moving toward digitizing processes and creating digitally enabled services for tenants and users. Practically overnight, physical distancing and the lockdown of physical spaces have magnified the importance of digitization, particularly by measures such as tenant and customer experience. Within residential real estate, players that have invested in digital sales and leasing processes—using virtual open houses and showings; augmented and virtual reality; and omnichannel, targeted, and personalized sales—will more quickly allow their residents to find the right space for themselves.

When an operator may have to keep its amenity spaces closed for months, creating a differentiated experience will necessarily involve a suite of digital-first products and experiences: telehealth, on-demand delivery and concierge services, virtual communities, contactless access for residents, guests, and maintenance staff, and much more. As more users adopt these digital-first products and services, users’ expectations will be raised, and players that provide a differentiated post-crisis experience will stay ahead of the curve. These digital offerings will pay dividends in the form of superior loyalty and the ability to create brand new revenue streams while better meeting the needs of tenants and end-users.

Acquiring operating companies, not just single assets

In the context of a post-coronavirus world, most investors and operators are reconsidering all capital decisions. Extreme uncertainty surrounding the duration of cash-flow depression and exit capitalization rates make it exceedingly challenging to underwrite acquisitions and discretionary capital expenditure with confidence. And private market players that are not facing near-term financial distress intend to hold assets through the downturn—some view the current environment as a valuation issue, not a value issue. Still, record-high dry powder is influencing investor attitudes.


Many have already shifted their mindsets toward finding single assets at bargain prices, though the current difficulty in accessing capital markets has delayed action, and supply may remain constrained as potential sellers wait for valuations to return. These combined complications have caused many real estate leaders to focus on acquisitions of operating companies, large asset portfolios, and public real estate investment trusts.

Rethinking the future of real estate, now

Some landlords are now starting the process of thinking ahead to when the crisis is over. Strategic review processes aim to understand how real estate usage might change going forward. However, rather than relying on traditional economic or customer-survey-driven approaches, real estate leaders are looking to psychologists, sociologists, futurists, and technologists for answers. Will employees demand larger and more enclosed workspaces? Will people decide not to live in condominiums for fear of having to ride elevators? While uncertainty currently reigns, by employing a range of creative personnel and using new methodologies—such as deep design interviews—business leaders may find new and more predictive insights.


As during the period following the global financial crisis of 2008, while some real estate players go beyond just adapting and flourishing, others fade. Individual firms’ abilities to weather the storm will depend on how they respond to immediate challenges to the industry—particularly the current declines in short-term cash flow and demand for space, as well as the uncertainty surrounding commercial tenants’ ability to pay their bills. In the medium to long term, the changed behaviors forced upon the industry will have likely altered the way consumers and businesses use and interact with real estate. The critical question is which of these changes will stick. Throughout, acting quickly and smartly will help determine the fate of players not only in these challenging times but also as the industry emerges from the current crisis and inevitably reinvents itself.

US coronavirus relief funds: A guide for state and local governments


Can HVAC systems help prevent transmission of COVID-19?

Modifications to heating, ventilation, and air-conditioning systems might help reduce the spread of the novel coronavirus by purifying air, improving ventilation, and managing airflows.

Modifications to heating, ventilation, and air-conditioning systems might help reduce the spread of the novel coronavirus by purifying air, improving ventilation, and managing airflows.

Although much remains unknown about COVID-19, scientists have established that the coronavirus is highly contagious and transmitted via air. Studies suggest that it primarily spreads when infected people cough, sneeze, or talk—actions that expel respiratory droplets containing particles of coronavirus in combination with mucus or saliva. If these droplets land on or are inhaled by others nearby, they could transmit the coronavirus.1 Touching doorknobs, computer screens, or other surfaces on which droplets have landed may also lead to infection. The now-common guidelines for wearing masks and physical distancing—typically, by remaining six feet away from others—reflect these observations.

Questions remain, however, about whether tiny coronavirus particles, of about 0.1 microns in size, can become airborne and travel greater distances. Although heavy droplets, of about five to ten microns, usually travel less than one meter before settling, smaller droplets may evaporate, leaving virus particles, referred to as aerosols, suspended in the air.2 A recent study demonstrated that coronavirus particles may be active for up to three hours after their release.3 Although the World Health Organization (WHO) initially held that the coronavirus could not be spread through aerosols, it recently reversed its stance. The WHO guidelines now state that airborne transmission of the coronavirus may be possible indoors, especially for people who spend extended periods in crowded, poorly ventilated rooms.4 The WHO’s turnaround came after the organization received an open letter from 293 scientists asking the organization to reconsider its position on airborne transmission.5


Given the concern about airborne transmission, building managers, safety experts, and others might take steps to optimize ventilation and airflow indoors and limit viral spread. Some simple moves may help (see sidebar “Low-tech strategies for preventing airborne viral transmission”). But this may also be a good time to think about improving air quality in buildings by significantly changing heating, ventilation, and air-conditioning (HVAC) systems or by making physical changes to manage indoor airflows.

Control-setting changes and upgrades to HVAC systems


Earning the trust of tenants


HVAC systems6 can potentially spread a virus across rooms when high-speed air flows past an infected person to others, something that has been shown with Severe Acute Respiratory Syndrome in 2004.7 If airborne transmission is also possible with the coronavirus, a few control-setting changes and upgrades may help decrease the risk of spread through this route. If building managers take such actions, they might help their tenants feel more comfortable amid all the uncertainty about the coronavirus (see the sidebar “Earning the trust of tenants”).

One step that technicians could take involves configuring ducted HVAC systems to increase the rate of exchange with fresh fresh air from outside the building to reduce recirculation. Adjusting the settings may also help. Instead of shutting down overnight or on weekends, for instance, the HVAC system could run without interruption to increase the replacement of air and minimize airflow speeds.

In buildings with old or inflexible systems, technicians might consider upgrading HVAC hardware. Some of the most important might include these:

  • replacing fixed-speed fan motors with variable-speed ones to enhance the control of airflow and allow for a minimum setting that produces lower speed airflow

  • introducing sophisticated airflow-control systems, such as those that are sensitive to pressure, to allow for smoother adjustment of airflows

  • installing high-performance air-purification systems, as discussed in the next section


Options for air purification

Numerous technologies can purify air. Filtration is the most common and typically the most effective method for HVAC systems (Exhibit 1). Other technologies, including irradiation and thermal sterilization, inactivate biological particles in the air without removing them. HVAC systems can also incorporate ionic purifiers, ozone generators, and other devices for cleaning air.


Filters in residential or commercial HVAC systems are usually installed either at an air inlet or outlet or within the central air-handling unit. Since external air that flows into an HVAC system may be contaminated, especially in metropolitan areas where buildings are in close proximity, technicians sometimes install a pre-filter for incoming air.

The mechanical filters in HVAC systems have tangled fibers that trap particles too large to fit through the openings. Mechanical filters have different ratings, based on the percentage of particles they remove, with the highest rated typically used in surgical or clean-room applications. Exhibit 2 shows selected filters and their ratings from organizations based in the United States. Ratings standards in other countries may vary.


High-Efficiency Particulate Air (HEPA) filters are most effective at removing small particles. To meet this qualification under the US ratings system, filters must remove 99.97 percent of particles of 0.3 microns. Minimum Efficiency Reporting Value (MERV) filters are assigned ratings according to their ability to filter out large particles (from 0.3 to 10.0 microns in size). MERV filters with ratings of 17 or higher are comparable to HEPA filters and may be referred to by that term.8 Like the air-conditioning systems in most homes, commercial buildings generally have filters rated MERV 12 or lower. Only some air conditioners can accommodate HEPA filters, and technicians must configure them properly and replace them regularly.

Upgrading HVAC systems by incorporating higher-grade filters can be very expensive and is not always feasible. What’s more, even a HEPA filter will not eliminate all concerns about airborne transmission. Although a NASA study documented that HEPA filters can stop particles as small as 0.1 microns—the approximate size of the coronavirus—other direct research is limited, and the official US ratings system specifies their efficacy only for particles of 0.3 microns.9 More research is needed to definitively determine a minimum filtration rating that will eliminate infectious coronavirus particles from air.

Airflow management

While studies are still ongoing about how the coronavirus spreads via air, evidence suggests that measures to change indoor airflow patterns could play a role in reducing transmission. Three main principles apply:

  • encouraging a vertical laminar rather than turbulent airflow

  • ensuring a slow, steady air speed

  • directing potentially contaminated air out of rooms and away from people


In-room airflows

The World Health Organization recently acknowledged that some evidence about in-room transmission is worrisome. In addition, after analyzing a transmission event at a restaurant in China, the US Centers for Disease Control and Prevention (CDC) concluded that an asymptomatic patient transmitted the virus to families at two nearby tables (Exhibit 3).10 Based on the restaurant layout, seating arrangements, and smear samples from air-conditioning inlets and outlets, the CDC found that the coronavirus was likely transmitted when strong airflows from a nearby air conditioner spread large droplets from the infected person. These droplets traveled more than one meter—further than usual, but less than the distance aerosols can typically travel.


Changing airflow patterns to create laminar vertical airflow—air moving in the same speed and in a straight path—may effectively prevent the airborne transmission of coronavirus particles.11 This principle is already used to prevent the spread of particles in several settings. For instance, clean rooms and hospital operating rooms minimize contamination via sophisticated systems to direct air from the ceiling to the floor with laminar flow. On commercial aircraft, ventilation systems are configured to blow air vertically from ceiling to floor to reduce the spread of contaminated air within the cabin.


Creating airflows that are close to laminar will involve far more than changing HVAC settings. In new construction, for instance, builders must include a sufficient number of air outlets. In existing structures, technicians may need to upgrade the outlets in HVAC systems—for instance, by adding some outlets in the space provided by suspended ceilings. In some cases, technicians may replace outlet covers, which are normally designed to mix and distribute air, with covers that produce laminar flows. For both new and existing buildings, the placement of air outlets is critical and must be based on planned occupancy, room architecture, furniture placement, and other factors that influence airflows.

In some cases, building managers might want to add physical barriers, such as partitions that separate open space, to manage airflows within rooms. They could also install in-room sterilizers to reduce viral concentrations, but these increase turbulence and are thus recommended primarily for offices occupied by only one person.

Inter-room airflow

Some building managers and others may want to take steps to prevent contamination between rooms—something that could occur if the coronavirus is found to spread via airborne transmission. Technicians should identify how air moves through rooms before installing new devices or upgrading HVAC systems. Their evaluations could include a blower-door test, which involves creating calibrated pressure in a room and then monitoring the flow and leakage.

Several options, some involving HVAC upgrades and others focusing on simpler changes, could address any problems detected. These solutions might include installing doors or air curtains, generating overpressure above suspended ceilings, and sealing any gaps in them (Exhibit 4).


Individual protection

In some workplaces, close physical contact is difficult to avoid, which makes viral transmission risk higher. To date, however, no commercial products protect airflows within individual workstations, such as a specific position next to an assembly line or an employee’s desk. Innovators may introduce some solutions for individual protection, such as those that involve adapting principles from airflow-control units or ventilation hoods, especially if the evidence for airborne transmission of the coronavirus continues to climb.


As economies worldwide reopen, healthcare officials have good reason to fear a second wave of COVID-19. Offices have traditionally accommodated large numbers of people and were designed to foster interaction and collaboration. Manufacturing shop floors sometimes require employees to work in close proximity. Schools, with their historically strained budgets, will find it especially hard to separate students from one another and from faculty. Hospitals have put off many elective procedures and noncritical surgeries for months and could begin seeing more patients in closer proximity.

Governments, trade groups, HVAC manufacturers, building engineers, and regulators may want to consider optimizing airflows whenever possible. Changes to ventilation systems, air-purification systems, and airflow management will probably be the focus of their work in this area.

Disclaimer: The document summarizes a preliminary view on best practices, potential design concepts, and approaches to ventilation and airflows that could limit virus spread in buildings. At this time, more research is needed on the airborne transmission of COVID-19 and the best measures for preventing viral spread. References to specific products or organizations are solely for illustration and do not constitute any endorsement or recommendation.

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Sustaining and strengthening inclusion in our new remote environment

Thoughtful action now can help teams build new habits, strengthen connections, and encourage the growth of inclusive cultures that will better realize the full potential of all employees.

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Thoughtful action now can help teams build new habits, strengthen connections, and encourage the growth of inclusive cultures that will better realize the full potential of all employees.

Working from home has become commonplace globally. The dramatic workplace changes introduced in response to COVID-19 have provided organizations the opportunity to reset team dynamics. This major shift can, and should, also serve as a catalyst to embed more inclusive practices and more effective leadership skills. Since working remotely could become permanent for some employees in the next normal, organizations and teams should not miss this opportunity to introduce new, valuable habits.


Inclusion, defined

An inclusive work environment doesn’t just happen; it requires sustained effort (see sidebar, “Inclusion, defined”). Stresses from COVID-19 and extended isolation are driving a range of negative emotions in employees. On top of that, recent prominent examples of racial injustice have affected many employees in ways that cannot be left behind when work begins. This is especially true for Black employees. While the systemic nature of racism demands systemic action, individual actions are an important part of supporting employees and ensuring they can continue to make meaningful contributions. Team leaders have an important role to play.


Why inclusion matters more than ever

During times of crisis, the focus on inclusion becomes ever more critical, but addressing it isn’t always as straightforward as it might initially appear. For instance, individuals can have mixed views on how inclusive their workplace is. Employees may feel that their employer’s overall environment is generally not inclusive (perhaps because of perceived inequitable access to resources or support) but their personal experiences may reflect inclusion based on frequent interactions with their team and immediate supervisors.

Accordingly, an inclusive environment cannot be achieved solely through systemic efforts, such as identifying and addressing unconscious bias and unintended consequences in formal processes. An inclusive environment is created in equal part by the behavior of individuals (leaders and peers), who make conscious inclusion a daily practice. Effective people management demands inclusive behavior, not least because inclusion leads to better outcomes and can support foundational business goals:

  • Win the war for talent. Recent The Jeeranont research found that 39 percent of all respondents say they have turned down or decided not to pursue a job because of a perceived lack of inclusion at an organization.

  • Increase retention of critical talent. Employees who experience microaggressions are three times more likely to think about leaving their jobs.

  • Improve the quality of decision making. Teams with greater diversity and inclusion make more accurate decisions.1

  • Build greater resonance and trust with customers. Treating employees well is the highest-impact way to communicate an organization’s values and strengthen relationships with their customers.


Ensuring that everyone, regardless of background, is set up to contribute their best thinking and work to organizational success requires understanding how each employee is experiencing inclusion. Leaders must be compassionate, strive to understand the challenges of their teams, and respond in ways that promote inclusion. The COVID-19 pandemic complicates this goal.


Seven practices to reinforce inclusion in remote workforces

People are now connecting in entirely different ways, often experiencing greater connectivity than they did before the pandemic. However, this environment does not guarantee greater inclusion at work. Without targeted intervention, noninclusive dynamics among on-site teams have the potential to be amplified in a remote context. For example, the habit of interacting primarily with familiar team members versus building new connections, supporters, and champions may be even harder to overcome when impromptu, in-person interactions are no longer possible. This dynamic is especially true for employees who already felt like an “only” on their team.

This moment provides an unprecedented window into the lived experiences of others. Many employees are now balancing a greater number of personal and professional priorities—and it is all on show on videoconferences. Those who aren’t comfortable sharing their full selves may feel even more exposed at a time when they may be experiencing greater stress and challenges than ever before. These inadvertent disclosures may include aspects of a person’s life they had previously covered and did not feel prepared to share.

Leaders play a pivotal role in shaping the dynamics on their team and in their organization. We have therefore developed a menu of seven actions for leaders to promote inclusion in remote working and establish new habits in their team.

1. Demonstrate vulnerability and empathy

Team members should feel comfortable being open and vulnerable, share more of themselves, and learn how to better support others.

For example:

  • Embrace the opportunity to share more about yourself (for instance, show your home and important people or animals in your life).

  • Get to know team members on a more personal level by asking open-ended questions on topics they care about.

  • Create space to learn what is on everyone’s mind; ask, “What’s going on with you, how is your home life influencing work life?”

  • Allocate time each week to do a physical-emotional-intellectual (PEI) check-in, asking each attendee to share details on how they are feeling physically, emotionally, and intellectually. Leaders should answer honestly and remind people, “It’s okay not to feel okay.”

2. Ask about people’s needs, acknowledge them, and tailor actions accordingly

Leaders cannot effectively advocate for someone without understanding what they are facing. Therefore, they could take a moment to ask what a team member might want or need instead of assuming.

For example:

  • Ask team members to share potential distractions or challenges they are facing and what they need to be fully present.

  • Share your personal circumstances and unexpected needs as they arise, demonstrate your understanding, and encourage others to feel more comfortable doing the same.

  • Reduce the length of meetings by five minutes from the usual 15-minute increments, allowing team members time to quickly check in with children or others at home before jumping onto the next call or videoconference. For example, a 30-minute call could become 25 minutes; a 60-minute call could be reduced to 55 or even 50 minutes.

  • Establish direct communication with coworkers who may feel like “onlys,” see how they are doing, and make a point to draw them into discussions.

  • Be brave and address the “elephant in the room”: acknowledge difficult situations, ask questions, and create space for people to share openly how they are feeling and what they need.

  • Be willing to have challenging conversations; start by acknowledging potential mistakes, and emphasize a desire to learn if others are open to teaching.


Without targeted intervention, noninclusive dynamics among on-site teams have the potential to be amplified in a remote context.


4. Build space for diverse perspectives and encourage greater participation

Leaders should harness the power of their teams’ diverse perspectives to enhance performance. To ensure team members have an equal opportunity to contribute in virtual meetings, leaders must prevent meeting attendees from defaulting to observer mode.

For example:

  • Send out an agenda for the meeting ahead of time, with clearly defined roles and content topics.

  • Have a rotating schedule of call facilitators.

  • Start the meeting by asking everyone to answer the same question to get their voices into the discussion.

  • Ask every participant for their opinion at least once and acknowledge their answers.

  • Give credit where it’s due; when an individual reiterates an idea that someone else put forward earlier in the meeting, point out who shared the idea originally.

  • Draw attention to and celebrate different opinions and the value different perspectives play in getting the best answer.

  • Coach team members through potential conflict by encouraging curiosity and learning how to be comfortable with not being right. Leaders should embrace the idea that their job isn’t to have answers to everything, but to guide the team to the best solutions.

Leaders must be compassionate, strive to understand the challenges of their teams, and respond in ways that promote inclusion.


5. Make time for structured remote team building and networking

It’s important to create space for connection as a substitute for in-person, impromptu engagement. Leaders should facilitate connections across the team and overcome the tendency to be drawn to the team members they already know.

For example:

  • Set up semiregular remote sessions dedicated solely to familiarizing team members with one another.

  • Develop exercises or games that encourage interactions with unfamiliar team members:

    • Pair team members up to get to know one another, joining in if needed to make the number work. Each person should be asked to introduce their partner to the group.

    • Set up a trivia game where everyone on the team submits a few fun facts about themselves. Questions can be developed to bring together the facts, drawing attention to both similarities and different strengths across the team.

    • Ask team members to share two truths and a lie. “Who would have thought it?” moments abound as participants share unlikely stories about themselves and learn more about each other.

    • Group team members into pairs or trios (depending on the numbers) and send them to separate virtual breakout rooms, IM channels, or phone calls to identify four similarities and one difference. After ten minutes, everyone can be asked to share with the group.

  • Draw on the energy and ideas across the group to develop a diverse set of virtual team events. Team members should be asked to volunteer to define a team-building event focused on getting to know each other and rotate the responsibility.


6. Be intentional about mentoring and developing all team members

Remote leaders face greater barriers to thinking of someone beyond their immediate network of go-to people. Experiment with new ways to allocate opportunities, as well as expand a leader’s circle.

For example:

  • Schedule regular one-on-one check-ins to discuss how individual team members are doing; assess their goals, interests, and explore their professional development intentions. Leaders should keep a running list of who they spoke with, and when, to ensure interaction with the whole team.

  • Assess the list of mentees and sponsors, and make it a point to add someone with a different background.

  • Keep a running list of people and their goals. When an opportunity arises, a leader should look at the list before allocating the opportunity to the first person who comes to mind.

  • Ask rather than assume a team member would or would not want an opportunity.

  • Increase transparency of opportunities by asking the whole team for volunteers.


7. Encourage team members to set individual inclusion commitments

Everyone plays a role in creating a more inclusive working environment. Leaders should reinforce this priority, establish accountability, and encourage experimentation with new behaviors.

For example:

  • Share your commitment with your team and be specific about the steps you’re taking to be more inclusive, such as by saying, “I will ____ this week; please hold me accountable.”

  • Ask each team member to commit to a tangible (and observable) inclusive practice to experiment with each week.

  • Share a list of inclusive actions for inspiration:

    • Invest in the well-being and fair treatment of others

      • Ensure people get the credit they deserve and clarify who raised an idea.

      • Return the conversation to someone who has been talked over or interrupted.

      • Pay attention to who is not speaking and actively bring them into the dialogue.

      • Suspend judgment when someone behaves differently and seek to understand their actions and motivation.

      • Every couple of weeks, set up time to chat with at least one person you’re not familiar with.

    • Become an ally to and advocate for targets of mistreatment

      • Draw attention to symbolic reminders of male-dominated work culture (for example, “bro talk” or references to males as “men” and females as “girls”).

      • Draw attention to the use of “other” language within or outside of the group.

      • Join an ally group and attend or volunteer to host diversity and inclusion events or discussions.

      • Stand up for others if you see instances of noninclusive behavior.

    • Lead with curiosity and seek to understand perspectives different from your own

      • Listen intently; draw attention to interruptions.

      • Invite different opinions to help you learn; after sharing a viewpoint, explicitly ask if there are any additional perspectives you should consider.

      • Ask questions to learn more and share what you understand to make others feel heard.

    • Support others to achieve their goals

      • Volunteer to take on “office housework” (for example, taking notes and organizing events) so it doesn’t always fall to the same person.

      • Take the time to share advice or knowledge from your experience with others.

      • Challenge yourself to quickly respond to the next ask for help (for example, request for review of a document) that comes from one of your team members.

      • Establish common language to celebrate inclusive behavior or draw attention to noninclusive behavior in the moment without implying judgment. For example, as a team, select videoconferencing tools or a word or term to call out noninclusive behavior.

      • Set up an end-of-week reflection (or include one in existing meetings) to celebrate positive changes and areas for continued growth as a team and reinforce a more inclusive environment.


The move to remote working has the potential to be catalytic in redefining how leaders make others feel connected and valued. Physical distancing could inadvertently be the impetus to increased emotional and social connection between team members and collective feelings of being heard, known, and respected. Leaders who take action can ultimately increase the level of inclusion and belonging among employees, even after we enter the next normal.

These inclusive practices not only make leaders more effective but also unlock the potential of teams and organizations. Achieving these goals, however, requires thoughtful and targeted action. Many of these may seem simple, yet we find that not everyone takes them. Leaders should reflect on what might be holding them back and encourage their teams to do the same. Ultimately, everyone in an organization contributes to building a more inclusive and effective working environment. People will be remembered for how they act and treat others during this time. Individuals and organizations that get it right will have an advantage regardless of what the future holds.

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