Trend spotting: What the near future holds for the property industry
Category Editorial
The arrival of the Coronavirus pandemic sparked a 'new normal' that has seen the property sector having to take fresh and innovative approaches to foster a more productive and sustainable industry.
The lessons learnt from the past year have allowed property professionals to identify trends that can be expected to be felt throughout 2021 and the main trends that can be expected for 2021, from a commercial property perspective, are increased demand for flexible lease terms and contracts, and increased demand for flexible and co-working space.
Flexible rentals and the rise of shared workspaces
A recent survey by Global Views, which comprised of 555 respondents involved in the commercial property sector, highlighted that the major trend for the coming year will entail a greater demand for flexible office space and lease contracts. The demand for this flexible office space is because companies want to be able to respond as nimbly as possible and to contract and expand their staff quotient as needed. This in turn will allow companies to cut down costs and maximise their profits.
However, this does present a few challenges to landlord and investors who are looking for income security in the long-term. With flexible lease conditions and short-term leases being in greater demand, landlords are potentially exposed to more risk and uncertainty regarding rental income. However, on the flip side, this may be addressed through higher rentals in exchange for shorter terms.
It is predicted that large corporates will increasingly embrace co-working or shared workspaces which will help them combat some of the issues associated with remote working and allow for more flexibility and cost savings.
Bruce Rogerson, asset manager for Tower Property Fund, which recently converted a large section of the Cape Quarter commercial office space into a shared workspace, says that the collaborative or shared workspace trend is a fast-growing one as more South Africans look for convenience, coupled with affordability and flexibility.
Retail tenants and smaller property classes
When it comes to retail tenants pursuing greater affordability, evidence is showing a move to smaller and more affordable community shopping centres, rather than the large shopping malls. This is a trend we anticipate will gain traction this year.
Amongst smaller property classes, we could also expect to see categories such as storage space outperforming those such as hotels and those in the leisure categories. The demand for the latter's being of a largely non-essential nature and unlikely to be strong during a recessionary period let alone the Coronavirus pandemic.
The industrial property sector
Statistics have shown that the industrial property sector was the highest performing property asset class for the past twelve months, with warehousing and logistics being the best performing components, followed by food-related businesses which fared relatively well.
Although rentals within the sector did soften, they did not experience it to the same extent that office, retail and leisure sectors did. Going forward into 2021 the industrial property sector will remain tough, however, will fare better than other property. Companies that are utilising industrial space will demonstrate an increased demand for more efficient spaces whilst modernisation across all businesses processes will remain a core theme. This will include further mechanisation of business processes, increased cloud-based solutions and far greater utilisation of computerisation.
The South African economy will most likely remain relatively weak for the remainder of 2021 and that the recovery of the property sector, like all other business sectors, will be heavily reliant on the roll-out of the Coronavirus vaccine and the speed and manner in which South Africa deals with it.
By Ross Spriestersbach, property manager at Spire Property Solutions
Author: Spire Property Solutions
