Aug 25, 2020

PropertyLine Issue 30: Local and Global Outlook

By Scott McKenzie, CEO

The late economist John Kenneth Galbraith said, “there are two types of forecasters; those that don’t know, and those that don’t know they don’t know.” Predicting the future is akin to looking into a crystal ball. However, what we do know is that thanks to COVID-19 a number of long-term trends already occurring in the commercial property industry have moved forward exponentially, such as the acceptance of employees working more flexibly and remotely.

The way humans interact with real estate will continue to evolve and change. Keeping an eye on human behaviour and how we use spaces will continue to be important. However, due to the contractual nature of commercial property leases and the fundamental human need to interact with others, there will not be major structural shifts in commercial property sectors overnight. We are more likely to see a evolution as leases come up for expiry over the next few years.

I have shared some views in an article (The Trend of Flexible Working Won’t Kill the Office) on our website about how I believe the office sector will fare over the coming months. To date, we still see valuations remaining firm for quality office and industrial properties.

With the ongoing trend of increased online shopping, the industrial sector will continue to strengthen. For the retail sectors, the trend toward them becoming places for entertainment and gathering, not purely as centres of commerce, has also accelerated. Those retailers that will succeed are already down the path of developing e-commerce and logistic offerings.

For the childcare sector, the outlook is also positive with more commitment and financial support announced by the Government in May1.

Overall, we will see a flight to quality by tenants across all sectors when making real estate choices.

We are under no illusions; the coming months ahead will be challenging. But our heads are up to anticipate and quickly adapt to the rapidly changing environment. We expect an increased focus on adding value to our portfolio in the months and years ahead.

With interest rates low for the foreseeable future and increased volatility in the share market, now’s as good a time as any to invest in long-term, unlisted quality land and buildings.

Content of this article is the opinion of Scott McKenzie and is not intended as personalised financial advice. You should seek independent financial advice from an authorised financial advisor before making any investment decisions.

Read the latest PropertyLine here.

1https://www.rnz.co.nz/news/political/416915/government-reveals- 278-point-2m-for-early-childhood-education-funding

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