The pain, so far, has been most acutely felt in an already ailing in-store retail sector. The trot towards online shopping turned into a gallop through COVID-19’s nationwide lockdown, with 32.8% of all retail sales moving online in May 2020, up from just 18.8% a year earlier.1
COVID-19 has also rapidly changed the location of work, with significant numbers of office employees currently working from home. Whilst many of us will hopefully return to the office in the next few months, the swift shift to home working proved successful, which questions the level of office space needed by companies.
To help ease the effects of the economic shutdown, the government injected huge state support to underpin incomes for households and SMEs. In addition, the government has protected renters across the UK by forbidding evictions in this crisis, recognising that a government-induced shutdown should be no reason why individuals should be forced from their homes. Perhaps an unintended consequence of this has been the adoption of this by lessors in the commercial space, where even cash-flush businesses have been slow to pay their rents, shining a light on whether a tenant truly is as high quality as perceived.
My previous review also highlighted how our focus in the past few years has been to determine long-term social or economic demand trends in relatively niche areas of the market. Ultimately, this demand should drive compounding rental growth over time and prove relatively resilient in a downturn.
Our holdings have by no means been completely unscathed from COVID-19 trauma, but neither do we think the longer term dynamics will be significantly impaired in the areas of the market they are operating in. I have highlighted how they have fared through the shutdown period and included the rent collection in each of the listed funds, which should provide some comfort to our continued ownership of the vehicles.
1 Office for National Statistics