Opinion: Be bold, take action, go forth and diversify

Choices manifest and demand our time to process and act accordingly. The ongoing barrage of digital advertisement always seem to be trying to get you to buy some awful contraption from an online retailer. These ads present us with a choice, it’s rarely a good choice, but still a choice. And it’s not just that paying $0.14USD/piece for 3000 rubber duckies is a bad idea, but it is the hours of time explaining the rational to my partner afterwards that make this a particularly poor choice.

One of the greatest achievements of the modern age has been the ever-expanding range of choices presented to us at any given time. As we recalibrate to our renewed post-covid freedoms, people will be presented with a wealth of new choices which they will need to assess based on their capacity for choice, the purpose for that choice and the priority of that choice. This reset and revaluation isn’t limited to the individual. Businesses, organisations, iwi, and Government will need to make choices as well. The coming choices will be materially different, in nature and in opportunity, than those made in the past 24 months, which most might refer to as the survive stage. Onwards from the global pandemic, how are these choices going to impact future outcomes as we move into the thrive stage.

Around the world costs continue to rise and so does the cost of inaction and the evident risk of uncertainty. The past 24 months has been driven by a clear purpose as public healthcare priorities trumped all. We are now waking up to the inflationary hangover with some significant challenges to overcome.

However, it’s not all doom and gloom, and costs and concern. Let me be the youthful optimist for a moment.

Investment typically requires predictability and certainty and, in a climate, where uncertainty is evident a retrenchment, back to what is known best is the most obvious way forward.
I propose the opposite!

When uncertainty is the only certainty, the best strategy is to diversify, invest, innovate, and adapt. There is more opportunity than ever to seek new infrastructure, business models and platforms, technology, education, and people. By embracing diverse opportunities, we are naturally sheltered from the turmoil which might impact any individual one. Those who choose not to choose may be left in the footnotes of the pandemic as just another business which could not adjust to the times.

The property sector is a hedge incarnate with a shared exposure to almost all sectors through tenancies, amenities, hospitality, development, and accommodation. The unifying aspect of investment property is that it is real. It’s not particularly easy to move a property into the digital ‘metaverse’ or to relocate hemispheres to avoid the colder seasons.

In the recent months, renewed interest in New Zealand from global investors is materialising as they seek to spread risk geographically. These investors put Aotearoa in the spotlight as an investable market with desirable returns. Given the pressures being faced on nominal returns, wholesale inflation and geopolitical risks, New Zealand is well positioned to continue to attract the eye of savvy investors from around the world.

In addition to geographical spread, investors are looking to diversify into commercial property asset classes which might lie outside conventional mandates. While the stability of core office assets and prime industrial distribution centres remain attractive, exploring the viability of data centres, cold storage, communication infrastructure, accommodation assets and others may prove too good an opportunity to pass up. These alternative sectors support further diversification from conventional mandates and can attract a wide range of domestic and international attention.

While diversification of capital is applicable to some, it is also important to extend the diversification strategy to other aspects of choice. Diversify educational qualifications, diversify cultural backgrounds, diversify working hours and diversify revenue streams. If we do not ‘know’ what will work, maybe we are better off hedging our investment of time and capital exploring multiple things rather than doubling down on a big risk and possible payoff.

With so many choices now upon us I implore you all to; choose wisely, seek flexibility, demand variation, explore options and invent solutions. After all it would be boring if following the laborious past 24 months to simply go back to the same thing hoping it would be just like it once was (which most seem to think was broken anyway).

Author | Richard Carr

Senior Investment Analyst, CBRE

Richard has a passion for economics, urban form and the interconnectivity created by the built environment. He currently is a member of the Wellington Regional Committee for the Property Council. 

Richard works for CBRE as a senior analyst within their Capital Markets team and deals with a wide variety of clients across a broad range of asset classes, geographical locations and investment mandates.

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