It's become a strategic game of chess rather than monopoly, it's not about sitting on Park Lane and collecting $200 when someone lands on your space.
Kim: Ash, really good to see you.
Tell me, this is part of the Aftermath Series, we are covering different sectors and working on what life is going to be like after COVID-19.
Property, how are you thinking about the sector long term and any insights you can give us on the sub segments?
Ash: Yeah thanks Kim, and nice to see you again.
From a property perspective, in the longer term in a post COVID world we are thinking about where the lasting damage is and what structural change we observe.
And perhaps to give an overriding thought on where we are at, we think it's an acceleration of trends that we saw pre COVID, we have jumped forward into the future perhaps 4 or 5 years, and we think what that means is that property and real estate, it's become a game of chess, it's all about strategy now, it's less about monopoly, it's not about sitting on Park Lane and collecting that $200 every time someone lands on your space. So we are thinking about property in far more reaching terms from a strategy perspective.
Kim: That sounds fascinating, the concept of chess and property, being an equity guy that is amazing. Tell me a little bit more, what does it mean in terms of trends for a couple of sub sectors, say offices for example.
Ash: Yes, so a couple of words spring to mind, so convenience and affordability, and that's being facilitated by technology in particular.
For a subsector like commercial or office we are thinking a region of core and region, convenience approach is what happens. So perhaps less premium CBD, more local usage.
And that's quite different to the 'hub and spoke' that we saw in the 90's, where perhaps the collaboration piece of office didn't really work, you had the poor cousins in the suburban office and it was expensive.
We think this time the model is slightly nuanced to be more local and less premium is where the demand is most affected.
Kim: So, what happens to all those CBD offices?
Ash: Well we do think CBDs have a role to play, we have seen perhaps virus pandemics globally before, if you go through history. We didn't have the technology to facilitate change like we do now, so we do think CBDs do have a role for collaboration and that's a really important piece to build culture in an organisation.
So the space that people use and gravitate towards in a post COVID world still has the role to play, but we think you won't be able to command the premium rents that you collected in the past just because you had Park Lane property.
Kim: I guess I am curious about shopping malls and consumer angles to this. What are you thinking there?
Ash: Well, we get that question a lot, shopping malls pre COVID and post COVID. We think again there is acceleration of trends we were seeing.
Online penetration has been a global theme, winning market share. You could think about as a virtual mall, we think that accelerates.
What that means though is that you need to offer convenience or experience, and you don't want to get caught in the middle of that. We think if you are local and convenient, you have foot traffic coming to you.
Supermarket anchored shopping malls we really like, particularly here in Australia and other regions where its expensive for that last mile delivery. Click and Collect works well in that sense.
Then if we think about the other end of the spectrum, the high-end premium, we like that from an experiential perspective, so you can't perhaps get your haircut on Amazon or online. You go to these malls for experiences, to get out of the house, and so we like those two ends of the spectrum. We think you don't want to get stuck in the middle, and there is some retail that is exposed to that which we are avoiding.
Kim: I guess to state the obvious getting out of the house sounds pretty attractive right now.
Well Ash, it's been great talking to you as usual. Listeners, audience this is part of a series called the Aftermath, come back again, check in again for the next update soon.
Regulatory information and risk warnings
Past performance is not a guide to future returns
The information provided should not be considered a recommendation to purchase or sell any particular strategy / fund / security. It should not be assumed that any of the security transactions discussed here were or will prove to be profitable.
The opinions contained in this recording are those of the named manager. They may not necessarily represent the views of other Martin Currie managers, strategies or funds. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.
The information contained has been complied with considerable care to ensure its accuracy. However, no representation or warranty, express or implied, is made to its accuracy or completeness. Martin Currie has procured any research or analysis contained in this recording for its own use. It is provided to you only incidentally and any opinions expressed are subject to change without notice.