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Pre-Covid, the South African economy was already struggling. If you were looking at office space to rent… well, things were kinda bleak. Vacancy rates were high all-round. Commercial property prices were down by 20%. And then the pandemic hit. Yup – you guessed it: all leasing, buying and selling activity came to a screeching halt.
To date, the office has been the worst hit with people working from home and the introduction of hybrid office working routines. But it’s not all doom and gloom. Director and Principal Commercial Property Broker Ashleigh Meyers shares how organisations and business owners are reimagining commercial spaces for business.
Will business ever set foot in an office again?
“We aren’t sure when the office will be back and how it [will look if it does come] back,” admits Ashleigh. “Retail was also badly affected with shopping centres having decreased foot traffic and the rise of e-commerce. Industrial remains the most resilient of the sectors, but it was still affected. Both tenants and landlords are uncertain,” says Ashleigh.
The value of property has dipped, with rentals in retail down 50% and landlords scrambling to create partnership agreements with tenants to try save their portfolios. “The pandemic has set us back by a decade when it comes to property rentals and valuations,” she says.
But there is a silver lining…
There are always opportunities in emerging markets – and even in our current distressed market, explains Ashleigh. “Many listed property funds are selling off prime assets in an effort to restructure their portfolios and keep their loan-to-value ratios [how much risk you’re taking on a loan] below 40%. This gives buyers an opportunity to purchase an A-grade asset with a good yield,” she says.
“When it comes to residential [property], the interest rate has never been more favourable for first-time homebuyers,” says Ashleigh. Young professionals are buying their homes with great bond conditions. Now is the time to borrow money!
And what about buying an office?
We don’t know how and when the office sector will return. “Many developers are converting office blocks into residential apartments to fulfil the demand for affordable housing,” says Ashleigh. “That being said, I do believe that the office is not dead in South Africa. We have poor infrastructure, unpredictable Eskom load shedding, insurance and cybersecurity issues to worry about when it comes to employees who work from home.”
Will organisations survive the #WFH set-up?
Not all sectors can pull off working from home, says Ashleigh, and the current office market is perfect for those looking to buy their own office suites. “At this time, industrial is a solid bet,” she says. “The sector has seen minimal damage with resilient rentals and tenants looking to relocate and downscale. Micro-industrial units are in huge demand. These are units below 500m2 at a market-related rental. This is a good investment for someone looking to own their own warehouse,” she says.
Consumer tastes and preferences are a-changin’
Now is the time to repurpose space and work in partnership with tenants until the market gets through this bottom end of the cycle. “Consumer tastes and preferences are changing because of the pandemic and they will have new needs that create new chains of product supply and demand. The property industry is cyclical and we will experience an upturn,” confirms Ashleigh.
Hang in there, grab the good deals and use this opportunity to start reimagining space.