Lego Heirs’ $ 20 billion fund says the future of offices is unclear

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    (Bloomberg) – The fund that manages the $ 20 billion fortune of the richest members of the Lego family says it will be years before the effects of the pandemic on office real estate are known.

    As a full return to pre-pandemic office life seems unlikely, real estate investors are trying to figure out what this means for their portfolios.

    Soren Thorup Sorensen, the executive director of the Lego Family Kirkbi Fund, said in an interview that he believes “it will be a few years before we know”.

    More than a year after the coronavirus pandemic hit Europe, some of the region’s largest cities are still shadows of their former thriving selves. In London and other major UK cities, the number of people actually working in offices is around a third of the prepandemic, according to Metrikus. Some studies even suggest that workers are more productive at home, and not all employers force employees back into the office.

    Kirkbi “examines the average working hours from home for different countries and different cities to get a complete picture that we can monitor,” said Thomas Lau Schleicher, Chief Investment Officer, in the same interview.

    Kirkbi has built a $ 1.4 billion real estate portfolio consisting primarily of office properties in London, Munich, Hamburg and Copenhagen, as well as a number of Swiss cities. The value of these assets increased by about 3% over the past year. Sorensen says it is currently unlikely that prime locations will suffer significant valuation drops.

    What Bloomberg Intelligence Says …

    “Working practices will be much more flexible going forward – knowing that working remotely is effective – which changes the demands on office space. We expect fewer staff densities, but more areas for collaboration and areas for temporary use. In cities like Zurich or Frankfurt, where the journey is short, relatively pleasant and environmentally friendly, people can still use offices. In large cities like London, where the road can be long, employers may have to weigh the need to attract talent to employees’ views on office work. “

    – Sue Munden, Senior Property Analyst

    “If we look at London, what does it mean when people work from home 1 or 2 days a week? It has some structural implications,” said Sorensen.

    “However, properties in attractive locations will continue to have significant value, especially in a low interest rate environment,” he said. “We can’t rule out that we’ll see an effect over time, but it’s too early to get a deal.”

    At Lego itself, office space is treated as a precious commodity that is reserved for the toy manufacturer’s own definition of an essential worker: the creative designer. Lego CEO Niels B. Christiansen said in March that the company’s toy bricks “just need to be in the office” because “they need to be where they have access to all of the materials they need for the creative process, including the Lego bricks. ”

    That means administrative staff have to work from home “to make room for the Lego designers,” he said.

    Kirkbi posted a 62% drop in profits last year despite generating most of its revenue from Lego, which delivered record results in 2020. The fund is positioned to outperform in 2021 as economies are expected to rebound, Sorensen said.

    “There are always a lot of clouds on the horizon, but these are difficult to respond to when you have a very large investment portfolio,” he said. “The bottom line for us is that we are not trying to control the time of the market.”

    © 2021 Bloomberg LP

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