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Offices are not dead; they are being reborn

Cape Town’s commercial property market is making a comeback. Photo: Rohan Reddy/Unsplash

Cape Town’s commercial property market is making a comeback. Photo: Rohan Reddy/Unsplash

Published May 31, 2022

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The rise of remote working and the boom in online shopping are a couple of factors influencing the commercial property market, says Franz Gmeiner, chief executive at Orion Real Estate.

And as the country embarks on the new post-pandemic era, which is accelerating developments towards the fourth industrial revolution, he believes commercial properties will remain good assets to invest in.

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“Given the country’s tough economic conditions, compared to high-risk stocks and shares, commercial property remains a more reliable form of investment with capital growth over time, especially within certain sectors such as industrial and offices. The key is to stay focused on the long-term future and to be versatile.”

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Some of this versatility is already being seen as commercial property owners reinvent their office spaces to accommodate new working patterns and trends.

Downsizing and reinvention

FNB commercial property economist John Loos, says it is clear that South Africa’s offices and parking lots are much emptier than they were before the pandemic. Although there is no accurate data yet in South Africa to show what proportion of the workforce has returned to the office, he says it is “noticeable” that more people are working from home.

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“I always stated that a portion of the workforce would return to the office post-Covid, and we can see that significantly fewer people are working in these spaces.

“I think many companies still have to downscale their office space as the sentiment was very much ‘wait and see’, but I believe that the return to the office is now complete as there are no more lockdowns. We are seeing a lot of empty offices and parking spaces.”

Loos believes that there is a lot of downsizing of office space to come, and that owners of buildings may consider renting excess space out to tenants.

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As firms adopt a hybrid approach to remote working and adjusted lockdown regulations boost a return to the office, Gmeiner states that the commercial office space is far from being a relic of a bygone era. Many companies are, in fact, repurposing their spaces or have added new amenities to accommodate the new workplace norms.

“It has become apparent that the commercial office has a role to play for team meetings and other collaborative endeavours. The market is telling us that while many folks will still work from home, office space is also helpful for colleagues to interact and enhance teamwork, innovation, and productivity.”

However, he predicts that offices will now be smaller, with social distancing in place.

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“Hot-desk type services and systems that allow workers to book a desk for a day will also play an increasingly vital role in commercial properties of the future.”

Office to industrial conversions possible

In addition to a number of office spaces being converted into residential apartments, there is also the belief that some offices can be redeveloped into industrial spaces, such as warehouses and last-mile distribution centres to meet the growth of online shopping.

The Q1 Rode Report on the State of the SA Property Market notes that a positive for the industrial market is the ever‐growing demand for new‐generation warehouse or distribution space. One of the drivers of this is the strong growth of online retail sales.

“Online retail sales made up 2.8% of total retail sales in 2020, doubling from 1.4% in 2018, according to the World Wide Worx’s Online Retail in South Africa 2021 study. This comes after growth of 66% in 2020 as consumers preferred online shopping due to the Coronavirus pandemic...

“Many local retailers have embraced online retail, such as Mr Price (Yuppiechef), Pepkor (Everyshop), TFG (Quench), Checkers (Sixty60), and Woolworths (Woolies Dash). Spar also finally started with online grocery and liquor deliveries in March 2022 in selected Johannesburg stores through its SPAR2U service,” the report states.

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Cape Town’s bounce-back

Gregg Huntingford, chief executive of Spire Property Solutions, says recovery of Cape Town’s commercial property sector is being fast-tracked, with office, retail, and industrial occupation rates showing a “healthy bounce-back” as the return-to-work trend continues and companies begin to focus on growth and recovery.

The reasons behind this rebound in the Mother City include the return to office-based workdays and the fact that the Western Cape is attracting skilled labour from other provinces.

“This semigration is supporting Cape Town’s resilient property market as skilled workers, entrepreneurs, and big corporates – both local and international – migrate to Cape Town to find work, set up businesses, and relocate their offices.

“Various multinational corporations are setting up bases in the Mother City. Apart from the obvious enticement of this beautiful city, South Africans from other provinces are in search of safety and security, and a better quality of life.”

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