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Bill Ackman Is Positive on Real Estate

GuruFocus.com
·3 min read

Even though he made a lot of money betting against the economy back in March, Bill Ackman (Trades, Portfolio) is an optimist.


The worldwide lockdowns of the last few months have done a lot of damage to businesses that rely on physical locations and who have large exposures to the real estate market. Despite this, Ackman believes that this could be a turning point for investors in real estate, or real estate-adjacent businesses like hotels, restaurants and office providers. He explained the rationale for his optimism in an interview with Yahoo Finance earlier this week.

New trends bring new opportunities

Ackman began the interview by stating that he doesn't think that the new trend of working from home will render offices and other commercial real estate obsolete. He did add that the property market requires granular, building by building analysis, but in general he thinks that there are a number of reasons to be hopeful for the sector.

A likely trend is that office density will begin to fall, which may have a number of consequences. One possibility is that more office space might be needed in order to spread workers out over larger areas. At the very least, a lot of old office space will need to be redesigned and reworked to accommodate new safety measures. Ceilings need to be raised, doorways widened and outdoor space increased. This would be good news for the commercial real estate sector, which sorely needs demand to be jump started.

Another area which has been reset is street retail. Ackman is a New Yorker, and so pointed out that rents for street retail in the Big Apple had risen to extremely high levels over the last few years:


"Street retail rents in New York got to really exorbitant prices and priced out all but the national, global chains. It's probably the best time in history to open a restaurant in New York City. I know that sounds like a funny statement, but rents are going to be lower than ever, competition is going to be lower than ever and it's going to be a challenging period over the winter, but hopefully by next spring [things will pick up]."



Ackman's Pershing Square Holdings is a major investor in companies like Chipotle (NYSE:CMG), as well as hotel operator Hilton ((NYSE:HLT), so his bullishness on the real estate market might be coming from a less than objective place. However, I think that the changes that he is describing are at least plausible and represent an interesting opportunity to investors who are looking for value in traditional brick and mortar businesses.

Disclosure: The author owns no stocks mentioned.

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This article first appeared on GuruFocus.