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Corona Capital

5 Jan 2021 By Breakingviews columnists

Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.


– Office vacancies

– Cohn’s new gig

Office spaces. If Zoom Video Communications is a pandemic winner, then commercial office space is its mirror image. The vacancy rate in New York edged above 15% in December, according to Savills, with leasing running at the lowest rate in at least two decades. It’s not an outlier among cities either as things continue to worsen.

Even as businesses are failing, new buildings are still being built. That has hurt office property owners. For example, Vornado Realty Trust stock is off 45% over the past year. While vaccination will eventually let people go back to work, many companies may be happy to rent less space, and workers to commute less often. That’s upside for the $100 billion valued Zoom. But it will mean more pain for the far larger market for commercial real estate offices, worth some $2.5 trillion in 2018 according to the National Association of Real Estate Investment Trusts. (By Robert Cyran)

Gary of all trades. How do masters of the universe keep busy after the stars are no longer at their fingertips? The options seem to be multiplying, if Gary Cohn is any example.

Goldman Sachs’ former No. 2 first tried the traditional outlet of political adviser, as assistant to the president for economic policy. Then he helped raise $720 million for a blank check firm, and advised several small startups. Now he has taken the role of vice chairman at IBM. The $112 billion tech giant said he will help in business development, client services, public advocacy and client relationships. That’s rather amorphous, but bulging contact lists are always useful in landing clients, deals and getting the ear of regulators.

Yet even masters of the universe can’t do everything. Plus IBM’s problems are mostly technological, and being too focused on financial cartwheels put IBM behind its rapidly-changing peers in the first place. Cohn has a Rolodex. What IBM needs is a greater focus on developing technology. (By Robert Cyran)

Norway to go. Tesla’s market dominance looks shaky if the world’s most advanced electric vehicle market is any indication. Norway on Tuesday released figures showing battery cars accounted for 54% of total sales last year, among the highest proportion anywhere. Yet it was Volkswagen boss Herbert Diess, not Elon Musk, who emerged on top. VW-owned Audi’s e-tron was the country’s top selling car, displacing the U.S. company’s Model 3. The German group’s low-cost ID.3 – released mid-way through 2020 – gave VW a combined 12% market share of new cars. Tesla’s share roughly halved to 5.5%.

Diess could use a boost after a fight with his own unions. The rollout of VW’s ID.4 electric SUV this year – competing with Tesla’s Model Y – should boost sales further. Tesla, by contrast, can hardly afford to slip up given that its shares rocketed 700% over the past year. Tougher competition in Norway, and elsewhere, will test that optimism. (By Christopher Thompson)

New year, new sweets. Mondelez International is taking another bite of the healthy snacking trend. The Chicago-based maker of Oreos bought the parent company of Hu Products, which sells vegan and paleo-friendly chocolate bars. Mondelez first invested in Hu in 2019 through its venture unit SnackFutures, and the latest deal values Hu at around $340 million, the Wall Street Journal reported.

Mondelez Chief Executive Dirk Van de Put hinted the company would grow through deals at a conference last month, and said premium chocolate was growing faster than the overall market. The company needs a boost since impulse purchases are down in the pandemic, while demand for packaged goods, such as cereal and ketchup, is rising. Van de Put might not be done shopping. (By Amanda Gomez)

Screen grab. Last year’s surprise cinematic blockbuster was China. With an estimated $3.1 billion in sales, according to ticketing agency Maoyan Entertainment, the country became the biggest movie market, exceeding North America for the first time. The pandemic rebound also helped catapult local historical war drama “The Eight Hundred” into the top-grossing film spot, with some $460 million of sales worldwide. Despite those achievements, however, domestic box-office revenue tumbled 68% from 2019.

For struggling theatres elsewhere, China offers some other encouraging post-recovery signs. Average film attendance in December, for example, reached 95% of the previous year’s number. That at least suggests audiences are ready to get back to the big screen. Hollywood studios including Walt Disney’s will have to stage a comeback of their own, though. Foreign films accounted for just 16% of China’s 2020 revenue, less than half the typical proportion. (By Jeffrey Goldfarb)

Back to business. Everyday life in India is getting back to normal. Schools, international borders and many offices remain shut or restricted, but restaurants, airports and hotels are bustling. Nomura’s India Business Resumption Index is tracking just 5.5 percentage points below pre-pandemic levels, despite the country having the highest cumulative case count after the United States. The outlook is brightening too: as the top manufacturer of vaccines, India won’t have to wait for jabs.

Many Indians have regained confidence to venture out as capacity strains ease on hospitals in big cities. Outdoor mask requirements, a younger population, warmer climate and some level of herd immunity – supported by studies that found high levels of antibodies – have helped slow the infection rate, health experts say. But the $3 trillion economy was also slowing before the pandemic hit, and consumption remains weak. There’s no room for complacency. (By Una Galani)

Next life. The shift from bricks-and-mortar stores looks set to accelerate. Take British retailer Next, whose shares surged to a five-year peak on Tuesday after it said sales in the nine weeks to Dec. 26 only declined 1% compared to an 8% slump forecast in October. Online sales were the saviour, with e-commerce turnover rising 38% in the three months to the end of December versus the same period last year.

Conversely, in-store sales are in freefall. Lockdowns and customer fears of contracting Covid-19 in bustling shops led to a 43% plunge in quarterly sales. Rival H&M, which has historically displayed sharp online nous, may reveal an even starker switch in trading updates over the coming weeks. Vaccine rollouts remain the one big hope for physical shops. But by the time they’re complete, the change in consumer habits may be permanent. (By Aimee Donnellan)


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