The commercial property market is down but definitely not out. Clever financiers will be backing developers with intelligent business models for the post-Covid world.
Bankers are busy looking at the health of their commercial property portfolios. Shares of developers have gone south as Covid-19 has pushed companies to send employees home and brought into question the entire future of the office.
But as with every Covid-19 issue, the challenge is to project beyond the doom and gloom and figure out how the sector will eventually be reorganised rather than to prematurely conclude that it is finished. Bankers should bear this in mind as they decide how to respond to commercial property companies which are currently in trouble. Private equity firms are waiting to swoop if they see banks throwing in the towel too early. They are happy to make money out of poor lending decisions.
Here are some of the trends that banks should be considering. Offices are not going to disappear but they may need to be repurposed in order to appeal to companies which want more flexible leases, better service and a safe working environment. On the warehouse side there will be an increasing demand for cold facilities that can handle distribution of fresh produce to online shoppers and, further out, the storage and sending out of Covid-19 vaccines to medical facilities.
Robotics and reshoring will be two big trends in commercial property. In the past, warehouse spaces in high demand were those near ports allowing goods to be stored as soon as they came off the ships. But in a re-shored world with more manufacturing done locally using AI, the ideal facilities will boast a combination of cheapness, a central location for distribution and suitability for robots.
For bankers who find all this complexity overwhelming help is at hand in the form of a blockchain solution created by New York-based Inveniam. With more effective use of banking data, real time pricing is possible for commercial property assets allowing for greater liquidity and capital efficiency. In these tough times, anything that frees up capital must be worth looking at.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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