Lego, bricks & mortar

You will all know the stages of WFH by now: in the beginning it’s a novelty (I certainly appreciated not standing on a windswept platform at some godforsaken hour). However, soon some negatives seep in. I began to miss the little things: coffee other than my jar of instant, the hum of the air-con (especially in the odd heatwave!), and the off-the-cuff conversations which inevitably happen when you’re hanging round others during the day.

This year two people have joined our multi-asset team, changing our trio into a quintet. Both Hannah and Rahab have settled in well, which is a credit to them as I imagine starting somewhere new during a pandemic and various stages of lockdown must be difficult. Some bits you don’t miss, of course, like the dreaded walk around the office, having the same conversation with 60 different faces you’ll never be able to remember. But without that office atmosphere, you don’t get to know people outside your direct role or soak up information and culture by being around all the discussions. If I was young and just starting out, I would want to spend more time in the office with those battle-hardened elders of the industry, absorbing as much as I could. You simply can’t replicate that on Teams or Zoom.

So after just over a year of solid working from home, in April this year I decided to start heading back to the office a day a week.

The generation game

I am beginning to wonder how much of this flexible working will ebb away over the coming years as businesses see that those younger generations are missing out on some of these vital lessons imparted passively by hanging round their teams and managers. If the next generation of workers doesn’t benefit from this office osmosis, it could leave many businesses with an experience gap in the future. Perhaps we may even see some businesses entice talented youngsters to join them by offering a more office-based environment where you get real face time with experienced heads. To some, this will sound crazy. But not to most youngsters: they are more likely to live closer to the office and less likely to have a spare room to turn into an office. With fewer kids and home bothers, they want to go out, have fun and learn. Old heads with a comfortable home office, large commute and family commitments may have to compromise if they want to keep quality junior staff.

So if these dynamics do play out and people do, in time, trudge back into the office more regularly, it may be premature to call the death of the city. From what I have seen around our office and what I have heard speaking to friends who have started to return gladly, they have realised they are missing something. Perhaps this means that we aren’t necessarily going to see vast empty offices across the cities like a scene from one of those apocalyptic disaster movies.

For a long time, our team has largely avoided property. Valuations haven’t been attractive enough to pull us in and we felt there was too much risk in the sector for the returns on offer. We are beginning to question whether we should be changing our view. Is property ripe for investment, or is this just a value trap?

Bargain or warning sign?

Plenty of change is yet to come, I think, and it’s going to take time for it all to shake out. However, some of these real estate investment trusts (REITs) are on 25% discounts, with yields over 5% in some cases. I wonder whether the pendulum of opinion has swung too far toward the view that we’ll all want to work from our home offices or kitchen tables as often as we possibly can forever. Often when everyone thinks something is a nailed-on certainty it’s best to start looking the other way.

As with any investment, it’s all a calculation of risk vs reward; am I getting enough bang for my buck? Property is getting to the point where it’s too hard to ignore. Meanwhile, more change is afoot in open-ended property funds. Many investors have already been burned by trading suspensions and there may be stringent exit notice periods coming down the line. Will more of these investors look to shift to closed-ended structures, creating another leg of demand to close those discounts? And lest we forget the much-shunned retail spaces. Could the recent liberalisation of zoning laws provide some portfolios with a second life? Are we at the bottom for rents?

We don’t have the answers of course, but we are now taking a much deeper look into the property sector to figure out if one of our most avoided areas for the last few years could find a new place in our portfolios.

Tomorrow is an office day for me, so I’m looking forward to a proper coffee, some lunch I haven’t had to make while dodging Lego blocks on the kitchen floor, and a good natter with colleagues. I’m sure I’m not the only one who feels that way.

To hear the team yarn about property, and more besides, tune in to The Sharpe End wherever you get your podcasts. You can also listen here. New episodes monthly.