Global markets cheered the arrival of 2020 with huge optimism as the S&P 500 reached several record highs last January. Yet in the midst of this booming start to the year news began filtering in about a flu-like virus that was spreading rapidly in a Chinese city called Wuhan. By March the global economy experienced the fastest contraction on record, followed by the fastest economic recovery on record over the subsequent months due to stimulus from central banks. Global markets were back to record highs.

The unintended consequences of the pandemic include investment and societal changes that are likely to have a long-term effect on markets. We have already seen how working from home by local and international firms has had a significant microeconomic effect on the world we invest in. One cannot deny that Covid-19 created chaos in many businesses, but it has also created investment opportunity.

On March 16 2020 (pre-lockdown), 900-million meeting minutes were recorded on the online video teleconferencing service Microsoft Teams, and on March 31 2.7-billion — on the day the world went into hard lockdown and businesses globally had to figure out how to work from home. It’s safe to say that working from home works to a large extent and is likely to feature in varying degrees in business operations going forward, along with finding solutions to the unintended consequences it brought with it. With this new world in mind there are companies, industries and sectors that are set to gain from the post-Covid-19 environment.

Telecommunications and technology companies are obvious beneficiaries. Their services enable us to connect, work, bank, shop and entertain ourselves. However, there will be other companies, sectors and industries that will find the post-Covid-19 world more challenging. Sectors such as real estate have been hit by new obstacles that need to be worked through to ensure survival.

This raises many new questions we need to debate as investment professionals. What will happen to the real estate sector? Will people ever go back to the office in the same way they did before? How will the advent of virtual platforms such as Zoom and Microsoft Teams affect the conferencing and hospitality industry? If we look at the market at a sector level there are significant implications to consider for each sector — some more positive than others.

Banks have been trying to convince the public for some time — particularly in emerging economies such as SA — to use their online platforms and switch to non-cash-payment methods. The enforced lockdowns created the unintended consequence of many customers exploring these alternative online banking methods. SA banks experienced a sharp rise in online activity as clients embraced their platforms. So is there still a need for bank branches? They are expensive to operate and require a material investment in security.

In a world of increasingly online and cashless banking — a trend that was already picking up before the pandemic — one must imagine that the physical bank branch will slowly become a relic of the past. Banks are beneficiaries of the new world, but so are their customers. Over time the cost of servicing a client digitally is far lower than using physical branch infrastructure.

SA food retailers (classified as essential services under lockdown regulations) experienced a surge in demand for online shopping and home delivery, leading to delays in some instances. However, we have noticed the retailers are also an adaptive industry and therefore invested in increasingly efficient and reliable home delivery. We as consumers have learnt that we can order some goods for delivery within the hour. Thus, once more we ask what will happen to the rather large floor space food retailers occupy in malls? This is one segment that has spurred new industries and new players in the “shopping and delivery” space. There are apps you can download that provide convenient and personalised shopping and delivery.

Clothing retailers experienced a similar surge in online shopping. Online retail shopping was rather nascent in SA, with a slew of experts attributing this to poor digital infrastructure. The growth in online clothing shopping has been positively surprising for the industry. Lockdowns even affected the fashion we wear — less formal corporate wear and suits, and in new categories such as “athleisure” (comfortable clothing).

Real estate companies are faced with the business challenge of making their offering more attractive to retain current tenants. Rentals during the different stages of global lockdown enforcement will reflect the changing landscape and optionality of their tenants. However, all is not lost for the real estate companies as malls were well on their way to becoming places of entertainment before the start of the pandemic. They will adapt, since humans are social beings, but this adaptation could change the tenant mix, the purpose and function of malls over the long term.

Office parks, on the other hand, are likely to face a more challenging future. The ability to work from anywhere and still get the job done does open up avenues for people to consider a holistic lifestyle more critically. Employers will also benefit from the ability to hire globally. Distance is no longer considered a hindrance to how office work is done.

The emphasis on efficiency in business operations, management and outcomes of various economic and social systems was by large not a conscious collective emphasis until the arrival of the pandemic. As a result, various new business considerations need to find working solutions, and they are by no means simple. Sustainable solutions rely upon complex, nested and interconnected systems to deliver goods and services around the globe in the wake of market changes and lockdowns. 

• Nxumalo is senior portfolio manager at Old Mutual Investment Group.


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