Brian Sloggett
Covid-19 and real estate investment: it will speed up change, with environment and community coming to the fore.
The question that many are asking is whether Covid-19 will trigger fundamental and permanent change, or will it be temporary.
Superficially it is very different from previous events that have led to permanent structural change be it container shipping, bar codes, financial de-regulation or the internet, because it is primarily behavioural in that it has stopped us doing things – a negative. However, I think it goes beyond this and its lasting impact will be because it has forced us to try new things – a positive. It is like we have been living in a bizarre and tragic social experiment that has forced us to adapt and learn. When we look back Covid -19 will be viewed as an external impact that speeded up change that would have happened. By removing social and economic resistance it forced us to fully adopt technology, change behaviours and make changes that were going to happen.
This is not to ignore the human and business cost of Covid-19 and I am conscious that many good business’s will never recover that has nothing to do with underlying structural change.
These changes include a realisation that many tasks can be carried out away from a communal physical place we call an office. A realization that work and home can work together. A realization that the way we were living was getting too intense. A realization that off peak travel is enjoyable and can fit in with effective working. Through spending more time in our local communities, a realization that they have a lot to offer. A realization that many choices we have are not binary.
One of the main trends of the last 30 years or so has been greater centralisation and concentration whether this be the growth of cities, office clusters or shopping centres. Scale has bought great benefits but costs also. Technology is enabling us to combine the benefits of de-centralisation whilst keeping the benefits of our cities and central areas.
So, what does this mean for real estate investment strategies? I have the following observations:
- Importance of community: start looking for retail and F&B in centres that combine a strong connection with a well- defined community they serve and provide accessible space that can be easily adapted. The de-centralisation trend will result in greater spending and more dwell time in these centres.
- Importance of environment: offices in central areas will remain an attractive investment proposition but they should not just replicate what you can do elsewhere. When you come together with your colleagues then there should be an incremental and positive benefit. From a real estate perspective, I think the better performing offices will be those that can deliver an environment that is creative and inspiring both inside and increasingly in the public realm outside over its lifecycle.
Two further observations. Since future adaptation and change will be increasingly important then construction methods need to change to make this much easier. Maybe the biggest change will be an investment strategy that is not just about buying the right asset but having a management strategy that is more focused towards its lifecycle because success will be increasing be about the quality of the environment the built asset provides in itself and its setting. This will increasingly require the involvement of the wider stakeholders including Local Authorities.
So, I started off by saying Covid-19 is primarily behavioural and I think success in real estate will increasingly require a permanent shift in our behaviour moving from a passive approach, to one that needs positive involvement though its lifecycle.
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Brian Sloggett
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