With the national vaccine rollout underway and offices re-opening in 2021, the South African economy is showing signs of improvement. While this is excellent news for commercial property trends spotters, it’s likely to be a while until companies return to business as normal. We take a look at the key commercial property trends for the year ahead.

As the real estate sector looks forward to better performance this year building owners will need to ensure that flexibility and affordability remain at the heart of their value offering in order to attract and retain tenants. 

In this article we’ll take a look at the economic outlook for the year ahead and find out what its impact will be on landlords and tenants respectively.

Giving the recovery time to happen

South Africa breathed a collective sigh of relief last month as the first planeload of COVID-19 vaccines arrived in the country. 

A national vaccination campaign will certainly bring a tremendous amount of relief and hope of economic recovery this year – but it may be best to adopt an attitude of cautious optimism until infection numbers start to drop substantially. 

In terms of commercial property trends, with the government predicting another wave of COVID in the coming winter the year ahead may be challenging in terms of finding and securing long-term tenants in the pre-pandemic fashion.

Meeting the needs of commercial tenants as they return to the office

In 2020 the pandemic gave us many new commercial property trends including the working from home phenomenon.

In an article published last year, we argued that working from home in the medium to long term will simply not be feasible for many businesses. This prediction has been borne out by the commercial space trends 2021 has displayed thus far. 

According to a report by McKinsey & Company in November 2020, remote work is likely to be determined not by occupations but rather by tasks and activities. Employees whose work doesn’t require customer or interpersonal interaction or even a physical presence on site are more likely to continue working remotely, but the question is – to what extent?

  • Work from home measures may have been essential to save lives, but as time moves on the realities of bringing our professional lives into our homes has started to sink in – and many businesses are planning to return to an in-office or blended model as soon as possible.
  • There are signs that major corporates are beginning to drive a flexible movement back to the office and ‘business as usual”.
  • As a result, demand for commercial properties is likely to increase in 2021- but the pandemic’s effect on our working culture is sure to be felt for years to come. 
  • Businesses are likely to reconfigure their workspaces and utilise hybrid models of remote working as a cost saving measure – especially for employees who can work independently with occasional feedback and collaboration.

What makes for an appealing commercial property lease in 2021? 

The combination of an economy in recovery and the prospect of lockdowns if a third wave hits South Africa in winter is set to create a very unique set of commercial property trends in 2021.

Appealing to tenants in this economic environment will depend on the following:

  • Openness to shorter lease periods. Tenants may remain unwilling to sign up for long-term leases until the pandemic is well and truly over. Shorter leases with easier notice terms for cancellation can help secure higher occupancy rates in uncertain times.
  • Reasonable rentals and annual escalations. Landlords can help support the economic recovery by meeting their tenants halfway with competitive rentals and annual increases in the single digits.
  • A win-win agreement. There is still scope for building owners to realise a good return on investment while offering reasonable rentals since the amount of floor space required is likely to be smaller than before. Many businesses may also be willing to pay a premium for flexible agreements. 
  • Repurposing premises to suit the current needs of tenants. The popularity of e-commerce has brought about a rapid reversal of fortunes for storage facilities and light industrial property. Premises like this, which were once overlooked, may be set to outperform premium Cape Town office space in the short term

Flexibility from both sides is key

With several glimmers of hope in the economy now is the time for tenants and landlords to come together and close mutually beneficial property deals. 

An experienced property agent can play a vital role in this process by matching suitable tenants with flexible landlords and assisting in the negotiation process to ensure a beneficial outcome.

The positive outlook for 2021 is just what business owners have been waiting for. We’d love to support you by helping secure the ideal commercial property that suits your company’s evolving needs. 

Contact us today to speak to one of our area specialists.