How leading asset managers are adapting post-COVID-19

COVID-19 has greatly altered the course for commercial real estate, seemingly overnight. But as we move past the onset of the pandemic, many experts are planning on how businesses can recover post-COVID-19.

In the recently concluded MRI Ascend APAC 2020, leading asset managers sat down with MRI Sales Director, Richard Exley to discuss how COVID-19 has transformed the way they do business and how they are adapting in the wake of the pandemic. Here are some of the highlights from the session.

Working closely with clients while working remotely 

As more teams resorted to working from home in the early days of the pandemic, the main focus for commercial real estate firms was to ensure communication lines remain open for their clients and tenants. 

“We were lucky that we already had a policy around remote desktop technology and people were trained in using tools like Microsoft Teams,” said Matthew McQueen, Portfolio Manager at Centuria Capital. But remote work certainly has its challenges. For Matthew, it’s keeping that mental resiliency to cope during a crisis while also dealing with anxiety coming in from clients. “You need to have that stability in understanding tenants, talking to them and getting to know how they’re affected by the pandemic.” He also added the importance of maintaining positive relationships during this time as it can affect the business in the long term. “We were very respectful of people’s needs because they will remember this time and how we responded and their chances for renewal will depend on that.” 

Dave Arlidge, Director of Industrial Sales and Leasing at Chalmers Properties in New Zealand shared the same sentiment. “We were talking to our clients multiple times a week and some of those conversations were tough. I think the outcome of all that has been about getting a whole lot closer to our tenants and understanding what their challenges are” 

For David Watson, National General Manager for Asset Management at Savills, a documented approach to communications ensure clients are well-informed on new processes and policies because of the pandemic. “We put a document together that gave our clients an understanding of what we as managing agents would be doing and distributed that to our stakeholders, clients, tenants and staff,” said David. “It gave us a navigable path for our stakeholders. We had to charge in the instance where we will be negotiating, but also gave options for clients who can do it themselves.” 

Laws provided a much-needed structure around relief 

With the onset of the pandemic bringing in financial challenges for tenants, agencies had to work extra hard to accommodate rent abatements, deferred and waived rents, incentives and rent review freezes on a massive scale. For the panellists, the legislation surrounding commercial leases during COVID-19 gave a clear path both for businesses in navigating the complexities of the pandemic. 

“The national code for us was a blessing and gave clear guidelines on how we can confidently and reasonably deal with tenants in assessing their claims,” said Matthew. “It also made our tenants a bit more relaxed because it was that uncertainty that caused them anxiety.”

In New Zealand, the situation was slightly different. “We already had mandatory governance which was put up after the Christchurch earthquake and basically, amended to include a pandemic. So that gave us some guidance we needed,” said Dave. 

Understanding the effects of the pandemic across asset classes 

While it’s true that the pandemic has impacted the industry as a whole, the outcomes vary for different sectors. For some, such as the industrial real estate sector, the effect was even beneficial. Understanding how the pandemic affects different businesses is an important step in mitigating risks for all parties. 

“We represent our investor’s best interests, but we also serve the interests at tenants closely. So our main focus was to look at the risk in front of us,” said Matthew. “The industrial platform is doing remarkably well. All of our tenants, for instance, are running at significantly high turnover in terms of in their warehouses or factories.” David agrees further explaining those in the distribution space particularly weather well in this situation, “Those winners are highlighted in the distribution space that is directly attributed to staples and I think there may be a flow-on effect down the track that we haven’t foreseen yet.” 

For Dave, whose portfolio features industrial assets heavily, the good performance of industrial clients allowed him to focus on other clients that needed more assistance. “Our industrial portfolio is running swimmingly but we also have retail tenants and they were the hardest hit through the lockdown periods. And they needed the most attention in providing relief.” 

But while the panellists agree that the retail sector will need help in navigating challenges, David advised looking closely in determining valid claims as circumstances will still be different for different retailers. “We’ve had large retailers who had massive uplifts in their turnover that now find themselves in the proper profit rent base when having to pay turnover, rents, and therefore seeking relief off their basis. It doesn’t gel,” says David. “People are trying to work the system and it takes our eye off what we need to be doing, which is providing advice and relief to those businesses that generally need it.” 

The impact on office space is also quite significant. Alternative working arrangements and stringent social distancing measures have affected how workspaces are being used. “In the long-term tenants will want less space. That means we have to work harder for tenants – provide higher incentives, manage facilities efficiently and all in all have a deeper understanding of how office buildings are occupied post-COVID-19″ said Matthew. His outlook for the future, however, remains optimistic, “I don’t think the office is dead. I think to post COVID-19 the next generation will probably yearn to get to the office as it is a different environment. And I think a lot of people will go back and things will normalise.” 

Technology post-COVID-19 

The COVID-19 crisis has highlighted the importance of technology, most notably in solutions that digitised and simplified processes, supported remote work and reduced face to face interactions. 

“Being able to have your data in the cloud is essential now,” said Dave. “You want to be able to go offsite, settle down and work reasonably simply. You also want to be able to access information quickly and in real-time.” 

For Matthew, it’s having an open platform that will allow them to integrate their system with other solutions that can improve their business processes, “It’s the reason why we moved to MRI. That ability to connect to other technologies and products using just one platform will be beneficial in the long run.” 

The real impact of the COVID-19 crisis will likely be felt in the coming months, as government relief start to come off. And as landlords, operators and occupiers brace for the challenges ahead, stronger cooperation between all parties will be the key in driving a better future for commercial real estate businesses. 

Watch the full panel 

Watch the full Commercial Panel: Technology in Post-COVID Times and other MRI Ascend sessions on-demand and hear from industry leaders, MRI Executives and Product Managers covering client case studies, product deep dives, industry issues and more.