The last few years have provided us with a steady stream of global, regional and local events on a scale that justifies the heightened anxiety levels reflected in business confidence and consumer spending surveys of late. Unfortunately, we can no longer chalk this up to a “rocky patch” that merely requires us to tighten belts, batten hatches and empty the cliché cupboard for a few months until the status quo returns.
We need to be aware that this is the new norm for us all!
Increasing global interdependence means trade deals, elections and economic uncertainty in far flung parts of the globe create constant opportunities and threats for businesses who can no longer rely on a business-as-usual approach to future planning. While political impacts have been relatively moderate in severity and speed, technological advances are what have, and will continue to drive the most change and cause the most disruption.
Technological advances are occurring at a rate where it is predicted that over 80% of the careers that exist today will be automated or redundant by the time this year’s first graders graduate high school!
So what does this mean for commercial property?
It is likely this will mean different things for different people, and prompt different behaviour. Passive investors looking towards retirement are scrambling for security of income through long term leases in sectors they believe to be immune from interruption. This is evident through the fevered competition for assets such as service stations with fifteen-year leases. Real Estate Investment Trusts (REIT’s) have grown in popularity, as they offer smaller investors the opportunity to own a piece of secure long-term bricks and mortar portfolios like Woolworths or Bunnings.
Owner-occupiers are looking to future-proof and streamline their operation by embracing technology, which is fuelling trends such as co-work spaces, virtual offices and outsourcing. The result is a shrinking of the footprints required by traditional operations and an emphasis on connectivity and function when selecting a property.
While the new norm of change being the status quo will continue to throw up challenges to businesses and property owners alike, some things can be expected to remain constant when it comes to commercial property. Functional properties in good locations will always be the last to come vacant and the first to be filled, regardless of the market. Owners with low gearing who pay attention to their tenant’s requirements will have the flexibility to shelter from the lows and capitalise on the highs, the cycle of which will no doubt mirror the accelerating pace of broader change.