Latest Posts

New cannabis bill could see construction taking the high road

The proposed amendments to the Cannabis for Private Purposes bill that seeks to further decriminalise cannabis usage and legalise South…

Read More..

A root cause of flooding in Accra: developers clogging up the city’s wetlands

Christopher Gordon, University of Ghana Ghana has six designated Ramsar sites. These are wetlands designated under the criteria of the…

Read More..

Nigerian property crime could be reduced if neighbourhoods were better designed

Adewumi Badiora, Olabisi Onabanjo University Nigeria has a very high crime rate. The Global Peace Index ranked it the world’s…

Read More..

Inner cities are growth engines attracting young homebuyers

Inner city living is boosting the city residential property market and driving urban rejuvenation Inner cities. Love them or hate…

Read More..

Kenya’s push for affordable housing is creating opportunities despite barriers

Raphael M. Kieti, University of Nairobi; Robert W. Rukwaro, University of Nairobi, and Washington H.A. Olima, University of Nairobi In…

Read More..

Heron IVC: Walking the green talk

Waterfall is closing the loop on waste Waterfall prioritises sustainability and responsible environmental stewardship as a strategic imperative, keeping the…

Read More..

Italtile unpacks new Nordic wood looks

Introducing Helsinki EcoWood by EcoCeramic Ceràmica. Right now, the hybrid Japandi trend is rising fast, with its calming combination of…

Read More..

Flagstaff Square sets a new standard for rural retail

Flagstaff, located in the OR Tambo district in the Eastern Cape, began its existence as a trading post and essentially…

Read More..

11th Jun 2022

Architect Africa Online

Africa's Leading Architecture Aggregator

Impact of lockdowns on Africa’s property market: adapt or die

The onset of Covid-19 not only affected people and communities, it also impacted commercial property value across the world. Roger Long, director: valuation and advisory services, Broll Property Group, sheds light on the pandemic’s effect on property in Africa and how some solutions are starting to emerge

The outlook for each country’s market at any given time, is largely tied to the expectations on the performance of the wider economy in that country, and it’s expected these trends will persist in the short to medium term. In terms of the pandemic, it was initially anticipated the hardest hit property value sector would be retail due to the lockdowns and subsequent inability to trade. However, many malls and most of the smaller centres have, in fact, fared relatively well during the last 14 months or so. This may be attributed to landlords acting swiftly with rent reductions, deferments, etc. resulting in many retailers managing to stay afloat, thereby preserving the rental income of the asset.

OFFICE VACANCIES

Instead, the office sector has been the hardest-hit asset class in South Africa, and the pressures are not expected to ease in the coming months. The fallout in the office market has seen property value and rental value recede sharply. In the early stages of the pandemic, a number of occupiers held firm and retained space during the lockdowns. Landlords were therefore still receiving the majority of their income even from empty buildings, but vacancies are now rising as occupiers decide they no longer need as much space.

The South African Property Owners Association (SAPOA) reported that Q3 2020 vacancies reached an all-time high of 15,4%, while the pre-Covid-19 level was 11,6%. Additional supply is also coming to market as a result of projects that were planned and started well before the pandemic. At the start of 2020, about 263,000m≤ was in the pipeline, which slowed to around 47,000m≤ by Q3 2021. Offices in smaller outlying towns are not as badly affected due to a more limited offering.

Johannesburg property value

FARING WELL

Prime logistics facilities are doing well, not only in South Africa, but across the continent. Furthermore, the growth in online retail has seen a corresponding rise in interest in data centres as companies move to exploit opportunities in the online sector. A number of data centre companies are expanding in strategic locations across West, East and South Africa.

OFFICES REINVENTED

In general, occupiers are seeking maximum flexibility, considering that their demand for space in the short and medium term is still relatively unknown or unconfirmed. Occupants want the flexibility to either work from home or to do so on a rotational basis. This would most likely be a long-term trend post the vaccination rollout.

Occupiers are increasingly focused on understanding what the future workplace will look like and how it affects their existing real estate structure. More corporates in this market are looking to not only optimise operational functions in terms of cost, but also in terms of the size of their requirements on property value.

Landlords, on the other hand, are seeking strategies to drive occupancy of their buildings. These range from more flexible lease terms and notable rental discounts (on a case-by-case basis) to looking at less traditional uses for their buildings. For example, the co-working model. Furthermore, landlords are looking at repurposing surplus or vacant space.

MULTINATIONALS IN THE DRIVING SEAT

A number of local players and parastatals are shifting towards better quality spaces, therefore competing head-on with multinationals. This trend will continue as the benefits of modern space are being discovered by tenants who have not traditionally occupied such space. In the A-grade market segment and, to a certain degree, B-grade, it’s predominantly the multinational corporates driving market activity. The fundamentals of this market, dollar rentals to be exact, tend to be financially unfeasible for local and some international corporates that earn revenues in local currency.

atlantic-seaboard-cape-town-image-1

SOUTH AFRICA

It appears that property value and rental value in the rest of Africa have not been as badly affected by the pandemic as in the case of South Africa, especially the office sector. It’s expected that a rebound to pre-Covid-19 levels could take until 2022 or beyond. One exception to the trend is industrial real estate, specifically warehouses and logistics centres, which have gained property value as investors snapped up buildings essential to the delivery economy.

Covid-19 has upset real estate fundamentals by changing how we lead our lives. Companies are already deciding they will need less office space than before, either because of staff cutbacks or because employees will permanently or partially work from home. And the rise of e-commerce – along with small business closures – will create a glut of retail space in a country that already had too much of it.

NIGERIA

The impact of Covid-19 on the office market has manifested in a number of space and cost consolidation strategies as a result of the health, economic and business impact on company revenues and general operations. Transactions are at a record low, with the lowest take-up in five years recorded in the first half of 2021 at under 200m≤. Vacancy levels remain high, with an average of 46% as opposed to the pre-pandemic level of 39%.

The residential sector, on the other hand, has witnessed some noteworthy transactional activity in the last six to 18 months. Driven by the necessity to store and create property value in a challenging business environment, especially with less than desirable yields in safe haven assets in the country, a number of investors have flocked to the residential market. There has been a great degree of investment in the luxury and middle-income segments, while affordable housing, which has the highest supply gaps, is yet to see this quantum of investment.

MAURITIUS

At the beginning of 2020, valuers in Mauritius had a cautionary outlook for the property market, predicting the industry would see similar trends to those witnessed in 2019. Rising average vacancy rates and downward pressure on rental growth, affected by the already low consumer confidence level and major disruptions to the economy, impacted property value further. However, no one could have foreseen the impact the pandemic would have on this already strained market, with international border closures in particular stifling the key tourism sector for many months.

KENYA

In Kenya, the office sector recorded a year-on-year (YoY) marginal improvement of 0,7% in occupancy levels and a corresponding 1,6% YoY decline in rental rates as landlords offer increasing incentives and discounts to fill space. The retail sector achieved an improvement in occupancy levels of 2,7% YoY, while rental rates declined by 3,1% YoY as landlords continue to also offer concessions in this sector. The asset class that has remained somewhat buoyant is the logistics sector. There has been increased interest for short-term storage, especially for medical facilities and goods.

GHANA

Although the evidence is not yet fully reflected in the market, there are sentiments that a number of commercial property tenants could downsize their space requirements due to new remote working practices. Leases coming up for renewal and rent reviews are likely to be agreed to the advantage of tenants. This is due to the increasing vacancy rates resulting from the banking sector reform of 2018 and large corporates opting for owner occupied developments.

mauritius-image-5

The post Adapt or die appeared first on Everything Property.

Syndicated content from Everything Property


error

If you find this website useful please spread the word.

RSS
Follow by Email
WhatsApp