Is history a good predictor of the future of structural changes in Australia?
History is littered with examples of companies failing to adapt to new technologies, only to find themselves struggling to survive. Horse coach company Cobb & Co failed to embrace trains and automobiles and subsequently collapsed. Eastman Kodak invented the digital camera in 1975 but opted not to develop applications for it, and as a result, Kodak lost its dominant position in the market.
At its peak in 2007, Nokia dominated the smartphone market with more than a 50 percent share3. Then Steve Jobs pulled out an iPhone and by the time Nokia’s mobile phone business was sold to Microsoft in 2014, it had around three percent market share.
In each of these cases, there was a substantial structural change in the economy which each of the three companies failed to act on.
Structural change in Australian real estate
Real estate is no different from any other asset class – over decades it goes through cyclical and structural changes. Peaks and troughs in cycles tend to follow the same trajectory, often based on monetary and fiscal policy, consumer and business sentiment, and/or supply in the market.
Structural changes, however, are much harder to predict.
The growing debate in the investable property markets is whether there is a structural shift underway in consumers’ habits that will trigger a shift in returns away from the long-favored retail sector, towards the industrial market.