Catalyst for change

I was privileged to be asked to join a private webinar by one of our Middle Eastern investors last week, which provided the opportunity for its external equities advisor to share his thoughts on the markets during this COVID-19 pandemic. It is healthy to step out of your own world from time to time and get a different perspective and so it was in this case.

The speaker identified that COVID-19 had acted as a catalyst for many of the changes already occurring pre-pandemic with respect to human behaviour, drawing this out to provide sector recommendations for the equities markets.

A fascinating analysis and one I considered further, particularly as it applies to Islamic investors considering their next real estate investment in these uncertain times.

Let’s start with the largest real estate sector of offices, not least as most of you will be having first hand experience of working from home.

Bold statements have been made about this being the death of the office sector, or at least that demand for space will crash, but thinking of this pandemic as a catalyst for change, the market dynamics have been moving for years already.

Occupiers have been downsizing their requirements by observing serviced offices, with less personal desk space compensated by bigger and far more inspirational breakout space.

Many of us have found working from home to be very efficient, but I crave the time when I can be with my team again and want to maintain a destination office where my colleagues can interact, share ideas and brainstorm solutions.

As we and others head back into the office world in due course, we may want increased lease flexibility, but again, leases were getting shorter anyway and this will only speed up that process.

As for retail, well, the move to online has been quickened, with the inevitable relentless demand for logistics space from companies and couriers alike. But that conclusion is too simple. As I have commented before, online provision has made consumers demand convenience and almost immediate fulfilment of their needs. This could still be travelling to your local retail park at the weekend or out at lunchtime to the shops.

Leisure and hotels? Those I speak to are dreaming of their next holiday, and while international video conferencing over Teams and Zoom continues to add greater interface than voice conferencing ever did, I will still want to meet our investors in their home countries and I strongly suspect that the demand for experiences will be strong, to the extent that government restrictions allow their supply, as the lockdowns start to lift.

Back to where we started with human behaviour. For most of us, technology and the systems built around it allow working, living and leisure to be efficiently provided at home, with Microsoft, Deliveroo and Netflix providing much of what we need, but that does not equal satisfaction. We are social beings, craving proximity (even more so now it has been taken from us) and interaction with each other.

As we come out of COVID-19 the world will be different, with many changes that were already occurring accelerated but also with a blessed return to activities we are yearning to enjoy again.

Stay safe.

This article was first published in Islamic Finance news dated 13th May 2020.