Kingsmill's Investment Miscellanea: Friday, April 2, 2021

Apr 02, 2021 | Joshua Kingsmill


Key Takeaways

  • Just as Bunnies have evolved, so too has the real-estate market
  • Golf courses and dilapidated strip-malls are converting into e-commerce purposed warehouses
  • As investors, our holdings in Real Estate should also reflect this new long-term reality

I thought I’d start this week’s brief Easter addition with the cutest Bunny I’ve ever seen. These “Sauteur d”Alford” rabbits, discovered in France in 1935, balance on their front paws (LINK).

Easter Bunny

Just as Bunnies have apparently evolved, so too has the real-estate industry, especially the warehouse space. Much to my horror, even golf courses are being converted into warehouses as demand for industrial space increases. Demand for industrial, big-box facilities - warehouses or distribution centers of 200,000 square feet or more — hit a record in North America last year. To be sure, the pace of e-commerce growth will likely slow in 2021, as people feel safe shopping at stores again, but we’ve all learned and adapted to the convenience (and lower price generally) of shopping on-line.

One of the beneficiaries of the huge increase in demand for on-line shopping is this growth of demand of warehousing and fulfillment. Amazon recently bought an 18 hole golf course in the town of Clay, New York, to build a $350 million distribution center. Companies are buying old defunct malls and turning them into warehouse spaces. Like the old golf courses, old malls are often situated in communities full of paying customers, which makes the land suitable for distribution facilities looking to be near people's homes. Vacant office buildings are becoming an attractive target to flip into warehouse space. More office space could end up on the market, as businesses extend remote work policies after the pandemic and need less space for employees' cubicles. We are also seeing a move away from those massive sprawling warehouse facilities in the middle of nowhere toward spaces closer to customers.

As investors, our holdings in real-estate companies and REITS need to adapt to this reality as well.

Just a short one this week. For those of us in Ontario, bracing for another apparent lock-down, at least the weather is getting better. This will be the 2nd year of Easter and Passover celebrations that have been limited by restrictions. I have no doubt that by this time next year, things will be different.