This week on Marketplace Africa, CNN International’s Eleni Giokos explores how the move to working from home is impacting the South African commercial property industry.
With nearly 45 percent of South Africans working virtually since March, companies across the board are re-evaluating the need for office space.
Even before the coronavirus pandemic, many companies were struggling to weather tough economic times. Estienne de Klerk the CEO of Growthpoint Properties, South Africa’s largest listed property company, explains, “We’ve experienced over the past, probably eight years a very, very weak economy in South Africa and as a result we have seen corporate South Africa shrink effectively and demand diminish for real estate space.”
According to the South African Property Owners Association, the country currently has its highest office vacancy rate in 16 years. The Association’s CEO Neil Gopal describes the situation, “Our Office Vacancy Report for Q2 2020 which was released in July shows that there is a 12.3% vacancy rate nationally in the country.”
The rise in empty office buildings is creating a knock-on effect on the rental market as a whole. John Loos, CEO of Property Economist, First National Bank SA, details the impact, “We’ve seen a very severe impact on the financial performance or the payment performance of tenants, and that with time does filter through into rental market strength and from there into property values.” Loos also explains that, “A First National Bank survey revealed that in the office space sector, tenants in good standing dropped from 77% earlier this year, down into the 60s within a few months of lockdown.”
Technology has enabled many businesses to keep operating despite working from home. However, some forecasters are warning of the technological risks involved with remote working. Suad Jacobs, Director of Forensics, ENSafrica details the potential hazards, “The South African Banking Risk Information Centre, SABRIC, has indicated that approximately R2.2 billion is lost per annum to cybercrime attacks. Fraud is going to increase significantly as a result of Covid-19, you’re seeing key drivers, there’s going to be more opportunity for people to commit crime and fraud and there’s going to be an increased pressure on people financially.”
Despite the negativity, the decline in the need for office space could create opportunity for more residential properties. Loos tells Giokos about this potential, “I think that the most obvious solution for a large part of office space has already been put in place and that’s residential conversion – Joburg’s CBD being probably the most prominent example. And as that’s happened and as these vacancies rates have risen, so over the years there’s been a lot of adaptation of office space into more affordable high-density residential accommodation.”
‘Marketplace Africa’ airs on Saturday 22nd August at 0615 SAST on CNN International
The show also airs at the following times:
Sunday 23rd August at 0530 SAST and 1900 SAST
Monday 24th August at 0430 SAST