Despite being one of the hardest-hit property sectors, investors in commercial property are being advised not to abandon their investments, but rather to take a more discerning look at the variety of property types and to be laser-focused on diligent asset selection.
While both retail and office property markets have been altered by the COVID-induced shift in behaviour, JP Morgan Asset Management (JPMAM) is advising investors not to back down just yet.
Considering the retail property market in particular, JPMAM explained that different property types have displayed varying levels of susceptibility to online shopping.
“Generally, ‘necessity’ retailers have fared better than those considered discretionary. Additionally, e-commerce penetration varies by regional market, as do retail property supply-demand dynamics,” JPMAM’s latest report said.
The research also pointed to an opportunity for retail property to transform post-pandemic, as consumers are almost forced to shop online.
“We see significant opportunity for operators that can reimagine and develop spaces in line with emerging retail models – models driven not by consumers’ pandemic-constrained behaviour, but by how people prefer to procure items, from groceries to big-ticket luxury purchases, in a more normal environment,” the report stated.
“The showroom aspect of retailing is expected to thrive as digitally native brands compete to establish their images and reach customers.”
While highlighting the potential bounceback of retail property, JPMAM is also bullish on office spaces post-COVID.
“Some are calling for the pandemic-induced demise of the office sector. We are more optimistic.
“Working from home has accelerated under COVID-19 and proven its technological feasibility. But an optimal, sustainable home/office balance depends on economics and human nature – and may vary across businesses and regions,” JPMAM’s report has found.
JPMAM opined that “viable investment opportunities” will be driven by “employers’ needs to attract the most productive workers to performance-enhancing, collaborative spaces in dynamic locations”.
Their constructive outlook is based on the following dynamics: