Governments, businesses and communities across Australia are feeling the impact of covid-19. It is not surprising that the retail and office sectors are most impacted by the pandemic with a slump in footfall at shopping centers and work-from-home policies enacted by businesses across the country.
No one knows what the new retail and office environments will look like in the future, but what we do know is that they will be different. In retail, a shift toward a multi-channel sales approach will likely be further developed and refined to provide an integrated customer experience.
In office, a meaningful shift in occupier demand is expected in relation to building infrastructure with demand likely gravitating toward smart office buildings and space over time. It is certainly worth closely monitoring developments in these sectors to identify future investment opportunities.
“Affordable housing for key workers is a particularly interesting sector in Australia”
We already began repositioning our property portfolio a few years before covid-19 started with a focus on sectors and assets that would benefit from long-term tailwinds on the back of changing demographics and consumer preferences. This resulted in a significant reduction in our retail exposure and older office and industrial assets while at the same time increasing exposure to affordable housing, build-to-rent, industrial and retirement assets.
Where to focus
Affordable housing for key workers is a particularly interesting sector in Australia. It is an area where you can have a platform deliver strong risk-adjusted returns while having a positive environmental and social impact.
The current challenging market conditions argue in favor of residual stock acquisitions to create scale and exposure. This is an opportunity we think will continue in the short to medium term before the supply lag from the previous construction cycle is absorbed. We have also been focusing on structured ‘off-the-plan’ transactions, JVs and new developments as these strategies allow us to invest through the cycle.
Finally, another very attractive sector is new generation industrial developments. This has been the case for around five years now and should continue to be so over the long term.
For example, we are very active in western Sydney on the back of new infrastructure and population growth, including our flagship direct investments in Bankstown and Camden Airports and Erskine Park. There is a clear trend toward larger industrial facilities driven by cost efficiencies, economies of scale, the rise of e-commerce and technological change. If we take Sydney as an example, there is also displacement of infill industrial precincts (re-zoned for urban renewal) and a move towards western Sydney locations due to efficiency from logistics and employment perspectives.
Misev joined Aware Super – then First State Super – in 2015 and is responsible for strategy setting and portfolio management in relation to Aware Super’s property portfolio locally and globally