The delta variant transition

From pandemic to endemic

As the Delta variant becomes dominant worldwide and forces some countries to reimpose restrictions, we ask a crucial question: What impact on consumer and investor behaviour will COVID-19, and its existing and future variants, have in the long run?

The good news is most experts agree that current vaccines are highly effective against severe disease caused by all known variants of the virus that causes COVID-19. The links between cases, hospitalisations and mortality have weakened in places with the highest level of vaccinations—Singapore, Canada, the U.K., Germany, and France are among the leaders in their rates of fully vaccinated individuals.

However, the links between Delta spread, severe illness, and mortality are still in place at the global level. When considering recent rises in cases and mortality, we can differentiate between countries that are highly vaccinated and those with limited vaccine supply (e.g., much of the developing world) or hesitancy issues impeding vaccine take-up among some population segments (as in the US).

In the U.K., which had the first experience of Delta outside India, cases surged sharply after football’s European Cup in July. The situation has stabilized quickly in a country where close to two-thirds of the population has been fully vaccinated. The ratio of deaths to cases was about one in 50 during the winter wave; it has fallen to one in 750 in mid-summer. Elsewhere in Europe, the Netherlands has broadly followed the U.K.’s trajectory, even though some light restrictions needed to be re-implemented in August. Similarly, Canada has opened its borders to vaccinated people this summer for the first time since March 2020.

Whilst Europe and Canada have successfully started to reopen, in some parts of the world, the worst phase of the pandemic is occurring now. The exponential growth in cases affects countries the most where vaccination levels are insufficient to prevent new waves of deaths, especially the southeast US, Latin America, and Southeast Asia. For instance, Peru, with less than 4% of the country fully vaccinated, is recording over 600 deaths per 1 million people—the highest in the world currently, and far above peak levels recorded in the U.K..

In the rich world, “zero COVID” countries such as China, New Zealand, and Australia, which have coped so well in earlier COVID waves, are seeing renewed restrictions due to relatively small outbreaks. In our view, these countries face a transition. They will have to remain closed to inbound visitors until vaccinations are high enough, and then must inevitably accept some low level of cases accompanying the reopening of borders. Singapore and Australia have recently laid out plans to reopen borders once vaccination rates are high enough, and shift the focus of concern from cases to hospitalisations. That said, political reputations had been staked on “zero cases”, so the accompanying shift in mindset may not be easy or immediate.

Because the Delta variant is more infectious than the original virus, it managed to breach these countries’ once air-tight pandemic defences, making it clear that we likely will not be able to eliminate the virus worldwide. This does not mean that the pandemic will go on forever; rather, the virus will become endemic, meaning widespread within the population, but manageable with a four-fold combination of vaccinations, contract-tracing, treatments, and occasional rounds of social distancing.

But as we approach the endemic state globally, waves of the virus will ebb and recede, likely with declining amplitude. “In the endemic scenario, where many people have some immunity, the coronavirus will not be able to infect as many people or replicate as many times in each person it infects,” says Sarah Cobey, an evolutionary biologist at the University of Chicago.

What does this mean for economies and for real estate? A more gradual end to the pandemic, characterised by attenuating waves, may result in more of our new habits—the “new normal”—being retained for longer. Modest control measures, like mask mandates and travel testing, should persist for the foreseeable future. The return to the office will also be slowed in countries where it has not already occurred. According to JLL’s Pulse Survey compiled in April, most firms targeted September for return to offices; however, several high-profile companies have announced they are delaying their plans by at least a few months.

The transition to endemicity will also impact the data we track as followers of economies and markets. Vaccination rates and hospitalisation rates should take over from case rates to become the key metrics in predicting a return to normality.

From the point of view of long-term investors, waves of the virus will diminish as the outlines of the post-pandemic world become clearer. Nevertheless, the Delta variant represents a major setback for a speedy return to pre-pandemic “normalcy”. This reinforces our view that some aspects of economic and social behaviour are likely to take longer to recover than many imagined six months ago.