In today's Digital Age, there has been a decline in commercial real estate, as tweeted by Chamath Palihapitiya on May 18th 2020, one of the best investors of the past decade.
But listen to this game I have for you before you congratulate me...One of the main reasons for the decline in this sector has been due to the trend in online shopping, especially with Covid-19 and lockdown measures; people would rather shop online than go to the mall. The direct effect of this will be the shops itself not being able to generate enough revenue to afford the rent, hence be forced to remain closed for x no. of periods until the easing of lockdown measures deems it's safe to do so. Until then, companies who haven't gone digital will continue to suffer.
During the length of this pandemic, working from home has skyrocketed, especially with big companies making this the norm, the correlating impact of online meetings has had Zoom's ($ZM) share price soaring 230% in the past 6 months, more gains than you'll ever get from the gym with those twig arms...So what do they normally do with these buildings? Renovate, turn them into high-rise buildings and lease out office spaces but I want to tell you about the sector that's not really talked about which is they don't tell you about it.
The E-Commerce OGs are gonna love this one. What do paper chasers do? Well, that's simple: chase the money. Why? Because they've learned to. Why? Because it's a skill they've crafted. Why? I swear, ask me "Why?" one more time... I'm kidding lmao...
OK, back to industrial real estate. Online orders have inventories, which need to be stored, so what better place than a warehouse? Normally 2 things drive this factor: Supply Chains and the increase of consumer spending; I mean with Black Friday and Christmas around the corner, I really don't have to put 2 and 2 together for you. For example, companies such as Amazon and their landlords are stripping down these buildings and turning them into distro centers. Madness!
Amazon has had 2 main long-term landlords:
1) Blackstone Group ($BX)
2) Prologis Inc. ($PLD)
Even the real estate market indicates increasing demand with industry professionals.
Furthermore, understandable if you don't have enough liquidity lying around to buy out a whole building, this is where Real Estate Investment Trusts (REITs) come in.
REIT - A company that owns, operates, and produces income via Real Estate; they normally own many types of commercial real estate from office buildings to shopping malls (as I said) to warehouses. These can also be bought and sold like stocks on most brokerages. REIT owners normally get paid dividends with the income the properties generate without the need to buy/finance the whole property.
UK REIT Rules:
1) At least 75% of the REITs assets must be properties
2) REIT must consist of at least 3 properties and not one property can make up for >40% of the REIT's value
3) No more than 50% of shares in the REIT can be held by 5 or fewer people - Basically, I do this on my own LMAO; no middle man.
With that being said, please carry out your own due diligence; and if you've got a couple bands lying around, you just buy a building and lease it out. It's literally that straightforward. Not just London, but cities that are expected to grow rapidly this decade. *Ahem* Birmingham, Manchester.
Prices are pretty low right now, so tell your wife Black Friday and Christmas is canceled, ladies tell your man to get off his lazy ass; enough with the jokes but my prediction is to expect these markets to boom in the next 6-12 months, carry out your own research but remember you saw it here first.