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COVID-19 Impacts on South Africa Real Estate

9/16/2020

Lianie Minny 
Managing Director of Internal Developers, a wholly owned subsidiary of Broll Property Group and a division of C&W | Broll Occupier Services. Specialists in workplace strategy, optimisation and turnkey developments.

As South Africa faces a steep decline of COVID-19 infections and a recovery rate of 88%, life all around is quickly starting to return to ‘normal’. Traffic is gearing up; malls are bustling and restaurants filling with eager customers - yet offices all over South Africa are still predominantly empty. A sore sight driving around the city like tombstones marking the cityscape where activity flourished only a few months ago.  

Occupiers are rigorously re-evaluating their property terms, seeking permanent ways to enable their employees to work from home and drastically reducing their real-estate footprint.  

As workplace strategists, we have never been in a more favorable position to assist businesses to optimise their real estate where previously hesitant with the reality of all employees working from home. Businesses should caution a singular drive in reducing real estate without acknowledging the long-term effect on employee engagement and wellbeing. When one considers that 90% of business expenses are allocated to employee costs, it should continue be their investment focus into the future.  

Employers need to get people away from viewing the office as work; the workplace can no longer only house a sea of desks. This art-of-science in strategic workplace planning is required to develop future-proof strategies with the singular goal to increase productivity not in how people occupy space but how they engage with the workplace and experience the world of work.  

 


16 April

Elaine Wilson 
Divisional Director Research, Broll

Economy Overview 

As the number of COVID-19 cases continues to rise globally, South Africa imposed a strict 21-day lockdown on the country, effective midnight 26 March 2020 and now has been extended by a further 14-days, set to end 30 April 2020, in a bid to flatten the curve and minimise the effects on its already fragile healthcare system. For a country riddled with inequality and a high percentage of immune compromised individuals, the rapid response from Government to implement the lockdown was critical. However, the warranted decision comes at a cost of placing an already weak economy under further pressure with the projection of a contraction of between 2% and 4%. 

Retail Overview 

The retail sector in South Africa will be hit with serious ramifications amid the decisions to curb the spread of the pandemic. With all retailers deemed as non-essential services and goods not being able to trade during the 21-day lockdown period, both landlords and retailers find themselves in uncharted territory with many retailers refusing to pay rental for the duration of the lockdown, a trend seen throughout the globe. 

Industrial Overview 

With production slowdown in South Africa, an already struggling industrial sector is set to endure even hard times leaving already high vacancy levels more constrained. Due to the lockdown, rental growth is set to slow even further while business confidence is also likely to continue to fall. 

Office Overview 

The office market which is already going through a transformation, with an increase demand for serviced offices, open plan working environments and hot-desking, resulting in reduced office space per person, will have to wait and see what effects the lockdown brings, with many people optimally operating in a work from home situation, enforced by the lockdown. 

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