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Real estate assets: its all about technology and location


In this article, we’ll focus on the impact of technology disruption on commercial property assets.


 

Commercial real estate is the place for business to do business and there are a number of mega trends driving the sector that are important for commercial real estate investors to understand.

These are technology disruption, demographic shifts and globalisation. In this article, we’ll focus on the impact of technology disruption on commercial property assets.

While it is often difficult for self-managed super fund (SMSF) investors to get direct access to real estate assets, they can achieve exposure through managed funds. It’s worth SMSF investors who choose to invest in commercial real estate as an asset to understand what drives this market.

While the outlook for commercial real estate is positive, asset managers must account for emerging trends when planning for the future of their investments. It’s essential for real estate assets to be positioned so they remain relevant for businesses, and investors are always assessing this factor when looking at real estate assets.

Therefore real estate investors must always be cognisant of thematic drivers across a wide range of industries and making sure properties are relevant for the target tenant group. Otherwise asset owners run the risk of vacancies, declining investment performance and asset values.

The impact of technology disruption on real estate assets

Technology has levelled the playing field for many businesses. Property and retail businesses have been adjusting their business and distribution models in light of this trend for some time.

Most investors understand the implications technology disruption has already had for the retail sector as shoppers have moved online to make purchases.

This is prompting retailers to design more engaging in-store experiences. For instance, many of the properties AMP Capital has interests in have undergone or are undergoing extensive renovations. An example is Sydney’s Macquarie Centre shopping centre.

But similar trends are starting to emerge in the office sector where technology is allowing staff more portability.

The industrial sector on the other hand is a beneficiary as the shift in retail sales online fuels growth in demand for warehousing for e-commerce.

Location, location, location

The site and configuration of the asset is another important consideration for commercial real estate investors.

Configuration is especially important as businesses seek to work more collaboratively. They want to empower their staff to work across business silos, and also with other businesses. So office layout becomes paramount to facilitate this style of working.

Fewer designated separate offices, more open spaces and hot desking are key themes for offices and the better asset owners have been taking these trends into account for some time. It’s worth noting these requirements can be met by newer buildings, but also older ones that may also have attractive architectural features certain tenants desire.

For AMP Capital, the takeout from this is the need to be very selective about the assets that are suitable for investment portfolios.

The idea is to identify real estate properties that have accounted for the changing dynamics in the commercial property sector, ensuring assets cater for retailers’ changing requirements and providing the physical space that allows them to meet shoppers’ new expectations.

 

About the author
Michael Kingcott is the Head of Property Investment Strategy and Research at AMP Capital leading commercial property research and investment strategy.
 
Funds related to this article: Wholesale Australian Property Fund

An income focused fund providing exposure to a diversified commercial property portfolio of high quality Australian office, retail and industrial properties often only available to institutional investors.

The Fund’s key aim is to provide investors with reliable income and long term capital growth.

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The commercial property opportunity for SMSFs

In today’s volatile markets, investors are considering more stable investment options.

By investing in commercial property you can have access to a diversified portfolio of high quality properties across the industrial, office and retail sectors.

Find out more about AMP Capital's commercial property offering, including benefits and risks.

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