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Gordon Marsden: Capital Allocation across Asia Pacific Office and Retail

Gordon Marsden • 15/03/2021

You are the new CIO of a fund manager, with exposure in retail and office investment across Asia Pacific. What is your investment strategy or allocation going forward?

Let’s assume a fair proportion of my exposure is to integrated projects in downtown locations. Ahead of Covid-19 there was already some re-invention taking place, from use changes to the emergence of new working practices seeking varied space solutions. I think it is once again safe to mention serviced offices (and co-working) given new demand, and that activity will still ultimately gravitate to downtown.

Where I don’t want to be, and I’d be scouring my portfolio for examples to actively manage out of, is where I can’t readily address the ‘new normal’ of health and safety and building resilience. I don’t mind development exposure so long as I can influence design as it becomes a leasing play.

From a retail perspective, I see under-supply and under-investment across retail formats in APAC. Absence of economies of scale and deep tenant relationships have seen some owners exit in recent years, creating the chance for me to selectively pick up additional projects.

Speaking of exits, a cautionary note is that there are limited pure play retail REITs, for example Scentre Group and the Japan Retail Fund. For other REITs the current approach is to retain retail while diversifying into other assets classes, most notably offices. Link REIT, for example, originated with a broad portfolio of retail and car parking assets but is now increasing its office footprint, but not to the exclusion of additional retail.

Immediately this suggests I’ve got an exit for my office assets. What it says about retail is more nuanced, but I’m positioned in a space with a declining number of participants, with an experienced Retail Asset Management team and long-term I’m content.

These opinions are the author’s own and do not necessarily reflect the views of Cushman & Wakefield. To find out more about how Gordon Marsden views opportunities across the Asia Pacific retail and office sectors, click his profile and get in touch. For more on investment opportunities across Asia Pacific, visit our Real Estate Investment Hub here.

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