Offices, the high street and warehouses: the new rules of property investing

TL;DR

The pandemic has led to significant changes in the property market, with winners including office buildings with better amenities and energy efficiency, suburban retail centers, and online shopping. Three to four days of office work per week may become the norm, and private investment in undervalued companies is likely to increase.

Transcript

hello and welcome to the latest Insider interview Our Guest today is Marcus fair Mudge manager of the TR property Investment Trust Marcus thank you for coming into the studio thank you Sam the pandemic reshaped the world economy it had a big impact on the property Market as well so what have been the big winners and losers since the pandemic and ho... Read More

Key Insights

• 🧑‍🏭 Offices need to adapt to entice employees back, with improved amenities and energy efficiency being critical factors.
• 🛍️ Suburban retail centers and small attractive towns are performing well due to the growth of online shopping and the avoidance of crowded shopping centers.
• 🧑‍💼 Three to four days of office work per week is expected to become the norm, leading to a demand for flexible office spaces.
• 🥺 Undervalued property companies are likely to be acquired by private capital, leading to increased merger activities in the listed property space.
• 💗 Rent controls may not be implemented in the UK, but there is a need to grow the private rented sector with tenant protections.
• 🛩️ Private investment in small property companies is likely to increase, driven by undervaluation and potential for growth.

Questions & Answers

Q: What changes have occurred in the office market due to the pandemic?

The pandemic has led to remote work becoming the norm, resulting in companies needing to attract employees back to the office by offering better amenities and energy-efficient spaces. Newer office buildings have seen the strongest rebound in occupancy rates.

Q: How has the pandemic affected online shopping, and how can investors identify winners in this space?

The pandemic has accelerated the growth of online shopping, with UK online sales (excluding food and fuel) reaching 30%. Investors can identify winners by focusing on companies that support online retailing, such as logistics developers and companies specializing in online sales infrastructure.

Q: Will remote work continue to be popular, and how does this impact the demand for office spaces?

It is expected that three to four days of office work per week will become the norm. While the demand for office spaces may not collapse, there will be a need for more flexible spaces and shorter leases, particularly for smaller companies that cannot manage hot-desking easily.

Q: Will rent controls be implemented in the UK, similar to Germany and Sweden?

The interviewee does not believe that rent controls will be implemented in the UK. Instead, they suggest the need for a social contract that protects tenants from bad landlords while encouraging the growth of the private rented sector, similar to purpose-built student accommodation.

Summary & Key Takeaways

• The pandemic has caused major shifts in the property market, particularly in office spaces and retail centers. Companies now prioritize enticing employees back to the office with improved amenities and energy efficiency.

• Suburban retail centers and small attractive towns are thriving due to the increased preference for online shopping and a desire to avoid crowded shopping centers.

• Three to four days of office work per week is expected to become the norm, leading to a demand for flexible spaces with shorter leases and ready-to-use setups.

• Private capital is likely to acquire undervalued property companies, leading to more merger activities in the listed property space.