• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Property investment and structural vs cyclical change

0
  • by Guest
  • in Blogs · Treasury
  • — 11 Jan, 2021

Photo by Alex Kotliarskyi on Unsplash

Sponsored article: José Pellicer of M&G Real Estate on why identifying structural vs cyclical change is key to outperformance in the 2020s.

The disruption caused by the pandemic has brought us to a familiar point in history, which we have seen unfold before. During the turmoil of the French Revolution, people thought the world was on the cusp of radical change, yet after the Napoleonic wars, the country reverted to absolute monarchy. It was a further 55 years before democracy finally consolidated in France. Similarly, people foretold the global financial crisis as the end of financial services in London (or, at least, a massive reduction thereof). Clearly, this did not play out.

Turmoil

History has shown that once turmoil comes to an end, things tend to slip back to the way they were. However, if a period of turmoil plants the seed for radical change, this pans out over an extended period of time. This can be seen in the retail sector, where online retail took off in the late 90s, yet the decline of high street retail kicked in through the 2010s—and not all parts of the market suffered equally.

While medium-sized shopping centres have struggled to recover value since the last downturn, good quality retail parks, shops in tourist towns and core shopping centres are now higher-valued than even before the financial crisis in some cases.

In the current environment, the ability to function efficiently from home has prompted fundamental questions, about the future of the office, and whether we are likely to see the end of business travel, for example.

For investors, including pension funds, with fixed liabilities to meet, the prospect of structural change represents both uncertainty and opportunity. Is logistics the new retail? Should we pile into alternatives?

In practice, the landscape requires investors to differentiate between what are likely to be structural changes versus cyclical changes.

As we’ve seen in the past, should change come to fruition, it will not happen overnight. When the pandemic abates, people will be eager to return to the office and business travel is likely to resume—frequent flyers are keen to get back on a plane. But if the pandemic has proven one thing, it is the ability to communicate remotely. Therefore, long haul trips for single (non-crucial) meetings could reduce drastically over time. But there is a flipside: the pandemic has also underscored our need for human contact.

Structural change

Key to outperformance in the 2020s is to identify where structural change is likely to manifest strongest.

It’s not a case of office use coming to an end; as we get a handle on the pandemic, a substantial part of the market is likely to behave cyclically, with a return to the office. However, over time, part of the office sector could enter decline, driven by tenant preference for high quality, future-proofed space that enables collaborative working, with good connectivity.

The grace of gradual change, is the ability to adapt. This is a time for careful observation, with the goal to reposition over time. But we should not overlook cyclical changes. There could come value investment opportunities given that some of what goes down will come up again.

José Pellicer is head of investment strategy, M&G Real Estate.

Photo by Alex Kotliarskyi on Unsplash

FREE monthly and weekly newsletters
Subscribe to Room151 Newsletters

Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address

Room151 Webinars
Visit the Room151 channel

Share

You may also like...

  • Faulty Towers Faulty Towers 10 Apr, 2014
  • Online interview: Gary Fielding, North Yorks CC 16 Apr, 2020
  • Power station rates appeal deals heavy blow to council’s reserves Power station rates appeal deals heavy blow to council’s reserves 6 Aug, 2015
  • Euroland update part 2: Bundesbank balance sheet 30% of GDP Euroland update part 2: Bundesbank balance sheet 30% of GDP 13 Feb, 2012

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 12 hours ago

    All three days of #LATIF & FDs' Summit are available on our webcast channel gotostage.com/channel/room151

    Room151 3 days ago

    FDs’ Summit experts defend councils as MPs label property investment ‘risky’: As Room151’s FDs’ Summit conference explores local government’s investment in commercial property MPs once again lable it a “significant risk to government”. Once again MPs… dlvr.it/Rr7lZx pic.twitter.com/jPvcZjDAS4

    Room151 4 days ago

    Global macro outlook: Virus versus vaccine: Sponsored article: Salman Ahmed argues monetary policy, a global vaccine rollout and fiscal stimulus are likely to put “upward pressure” on bond yields. Much like the latter half of 2020,[...] dlvr.it/Rr60nt pic.twitter.com/qsymBWmKmV

    Room151 4 days ago

    ‘Chasing yield’ not the best strategy as negative rates loom: Recent speculation that the UK may be heading toward negative interest rates prompts questions for treasury officers managing local authority funds at LATIF. Speculation is rife that the UK… dlvr.it/Rr3Mrj pic.twitter.com/wtxYAB20PO

    Room151 6 days ago

    Will new public procurement rules offer the best commercial results?: The government has issued a green paper on reforming procurement rules. Helen Randall and Rebecca Rees examine the proposals and argue they may not go far enough. The Cabinet… dlvr.it/Rqtw6T pic.twitter.com/9GiVTkL08U

    Room151 2 weeks ago

    The vaccine may help settle cash flows but inflation remains a risk: Sponsored article: Lauren Sewell examines the prospects for long-term borrowing as Brexit settles and vaccines are deployed against Covid-19. On the 9th October 2019 Whitehall sent… dlvr.it/RqZXCr pic.twitter.com/PzgOZOGQ0k

    Room151 2 weeks ago

    ESG in liquidity: Sponsored article: Gavin Haywood looks at the integration of ESG in Federated Hermes’ money market funds. Federated Hermes has over 300 public sector clients invested in our AAA rated money[...] dlvr.it/RqZX5f pic.twitter.com/E87sBXsay8

    Room151 2 weeks ago

    New realities of investing cash and liquidity: “What to do now?”: Sponsored article: Brian Buck looks at the “unique challenge” for cash management strategies. As investors assess the ongoing impact of the pandemic on their business, levels of cash and… dlvr.it/RqVbk9 pic.twitter.com/ZElVASmEUV

    Room151 2 weeks ago

    Extra finance promised by the government receives a broad welcome: Sponsored article: The financial pressures facing local authorities this year continue to pose challenges for council treasurers. While the launch of the UK’s Covid-19 vaccination… dlvr.it/RqTzTF pic.twitter.com/HCjH0pyHR5

    Room151 2 weeks ago

    A savvy approach to managing your cash: Sponsored article: Caroline Hedges examines the need for active cash management to achieve a higher than average return. Last year saw the already mountainous pile of negative-yielding debt around the[...] dlvr.it/RqTzMK pic.twitter.com/uP0RQYTJLt

    Room151 2 weeks ago

    Putting alternatives at the heart of multi-asset portfolios: Sponsored article: Nick Edwardson looks at the assets that provide the “most attractive opportunities”. We believe that asset allocation is the primary driver of investment returns and that the… dlvr.it/RqQ2Qt pic.twitter.com/WLBzvRRRUQ

    Room151 2 weeks ago

    Thriving in the pandemic: Avoiding the stragglers: Sponsored article: George Crowdy looks at the sectors providing opportunities for sustainable investment. Throughout much of 2020, we talked about why sustainable investing has thrived in the pandemic,… dlvr.it/RqQ2NQ pic.twitter.com/dxiPWKFsPl

    Room151 2 weeks ago

    The development of CCLA’s mental health benchmark: Sponsored article: Amy Browne examines the importance of investing in mental health in the workplace. We are living through a public health emergency in more ways than one. Physical health[...] dlvr.it/RqQ2Jx pic.twitter.com/o6yRSCX3oF

    Room151 2 weeks ago

    Brexit: What the EU trade deal means for the UK economy: Sponsored article: Hetal Mehta looks at the impact of Brexit on economic prospects. Four and a half years after voting to leave the EU, on Christmas Eve the UK finally[...] dlvr.it/RqLBDt pic.twitter.com/No62srfE8h

    Room151 2 weeks ago

    Cash dethroned: The quest for liquid yield: Sponsored article: Peter Hunt and George Carne ask how treasury departments can balance the need for yield and liquidity. The massive stimulus and waves of liquidity provided by central banks[...] dlvr.it/RqLBDj pic.twitter.com/05g6Zhu1kU

    Room151 2 weeks ago

    Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point: The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness… dlvr.it/RqLBDV pic.twitter.com/vTAbDKFzkI

    Room151 1 month ago

    PWLB Consultation: Analysis straight from Dickens: Helen Radall and Paul McDermott present a legal examination of the new PWLB borrowing rules as Charles Dickens might have imagined it. Free and easy PWLB (“Marley” to his friends)[...] dlvr.it/RnmwLq pic.twitter.com/yFxcPrQqEG

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Brexit: What the EU trade deal means for the UK economy
  • Next story The development of CCLA’s mental health benchmark

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK