How the Pandemic Is Driving New Investment Decisions

The pandemic has reshaped investment strategy. At Guggenheim Investments, the ecommerce boom has driven a lot of recent investment activity. On the other hand, the pandemic has also created new challenges. Jennifer Marler, head of real estate at Guggenheim Investments, is discussing the trends that are shaping real estate investment at the GlobeSt. Elite Women of Influence conference in July. She will speak about the latest trends with Julie Baird, president of First American Exchange Company and Genevieve West, VP at Howard Building Corporation.

Ecommerce is the major trend driving today’s investment activity, says Marler. “The surge in e-commerce activity and focus on the supply chain has driven a lot of our new investments over the last 12 months,” she tells GlobeSt.com. “We were already in an on demand world pre-COVID, but the increase in e-commerce and need to efficiently deliver goods directly to consumers, wherever they may be, certainly  put strains on the supply chain and has fueled a lot of new development activity.”

Guggenheim is strategically partnering with industry experts to co-invest in industrial product with a focus on warehouse and distribution space. They are targeting spaces with long-term leases and strong credit tenants to mitigate risk.

The pandemic created both new opportunities and challenges. In terms of challenges, Marler says that the shift to work-from-home has made it difficult for teams to collaborate. “COVID taught us that we can work from home, but we have also learned that a fully remote workforce may not work for everyone and creates challenges for corporate culture and high-performing teams,” she says. “The COVID WFH experience has created a lot of uncertainty around the future of offices:  CBD versus suburban, remote/flex/in-person work programs, how we use space in our offices, and willingness on the part of tenants to commit to long-term leases.”

These changes came rapidly, and in many ways, they have forced the commercial real estate industry to adapt. “The real estate industry has not always been quick to embrace change,” says Marler, adding that the pandemic has in many ways been an accelerator. “Sometimes a disruptor comes along that accelerates change and makes you re-think what you thought you knew about the industry,” she says. “COVID has done that across almost every industry sector in a way that may result in permanent shifts in how we view real estate.”

This market dislocation is much different than those in the past because it was not economically motivated. As a result, the changes that emerge during the recovery will have different motivations. “Past cycles have been driven by financial distress, a shortage of capital and liquidity concerns,” says Marler. “The COVID cycle is being driven more by choice than need:  decisions to work remotely, migration out of CBDs, online shopping, new technologies as a necessity rather than a choice, zoom towns, groceries on your doorstep, space over density, and more flexibility on all fronts. It’s a very exciting time to be in commercial real estate.”

Marler is going to explore these topics along with other trends driving investment and changing strategy at the GlobeSt. Elite Women of Influence conference on July 22 and 23.