Source: Ray Mahlaka, Bisuness Maverick, 5 May 2021, photo credit: iOffice
Market watchers don’t believe in the office apocalypse narrative as there are encouraging signs that life is slowly returning to normal, with more companies asking workers to return to the office. The roll-out of Covid-19 vaccines is key to getting people back to the office.
When Covid-19 burrowed its way into South Africa in early 2020, most property pundits predicted that office buildings would be the hardest hit because many companies or tenants were forced to embrace the work-from-home experiment.
To an extent, office building owners/landlords were hit hard as they had to spend millions of rands to make workplaces “pandemic-proof” by introducing touchless entry systems and desk dividers to minimise the spread of Covid-19. And some companies have successfully implemented remote working arrangements, pushing them to increasingly review and downsize their workspace needs.
This is bad news for office building owners, as the number of empty offices in SA’s key business nodes is rising and leases that come up for renewal are being concluded at lower rental rates. The office property sector was already in the doldrums pre-Covid-19 due to a fragile domestic economy and a development boom in business hubs that resulted in an oversupply of office space.
The recent financial results season underscores just how brutal 2020 was for JSE-listed office building owners. Growthpoint Properties, the largest office landlord on the JSE, saw vacancies of its office buildings increase from 15% to 18% in the six months to December 2020. Redefine Properties, another large office landlord, saw vacancies increase from 10.2% at the end of August 2019 to 15% over the same period in 2020.