Commercial property

6 business real estate trends to watch in 2022 in SA

Industrial property performs best in the commercial real estate landscape, thanks to relatively low vacancy rates, the growing importance of e-commerce and the relatively affordable price of this class of property.

And while commercial properties are yet to come out of the woods, Jack is excited about the industry’s ability to recover from the hard knocks of 2020. – essential businesses have been forced to close. However, Growthpoint reported that its vacancy rate for the first quarter of fiscal 2022 was 5.1%, down from 6.2% at the end of 2021, indicating a marginal recovery. “

The office sector remains under pressure with vacancy rates at its highest: 15.4% according to the latest report from the South African Property Owners Association (SAPOA). “This is due to the increased shift to remote working and an oversupply of office space in the country’s largest business nodes, especially Sandton. “

Jack isn’t predicting any drastic changes in the commercial real estate landscape in 2022, but rather that the six biggest trends will be a natural continuation of the market shifts seen in 2021.

Projected trends in commercial real estate in 2022:

1. Online auctions continue to gain ground

Auctions have become more and more popular, and this is expected to continue in 2022. “We also anticipate an increase in online auctions, which have seen a spike in activity in response to the pandemic and are now seen as a straightforward way. and safe to buy and sell property. in the digital age, ”says Jack. Galetti research estimates that around 5% of commercial real estate sales in South Africa are made through online auction platforms, a number expected to reach 25% by the end of 2026.

2. “Green” buildings will be required to end dependence on the Eskom network

The load shedding remains a stumbling block for the sector and it is very likely that it will continue until 2022, forcing companies to make alternative arrangements to continue their operations without interruption. “Commercial properties with generators are in demand, but buildings that run on renewable energy sources, such as solar power, are even more desirable, with many businesses looking to be as ‘green’ as possible. Jack predicts that an increase in the number of buildings with green features like solar thermal water heaters and energy efficient lighting will play a big role in this trend. “These will sell and rent at higher prices than others. “

3. Strategic use of traditional office space

As owners struggle to attract and retain office tenants and many businesses move their workforce online, Jack foresees an increase in the creative approaches of traditional office spaces to fill vacancies. “Landlords work hard to attract long-term tenants by offering attractive incentives such as on-site baristas, fully-equipped gyms with free tenant access, hot showers, and even rooftop bars for guests. drinks after work. In addition, we expect rental incentives such as free equipment and reduced rates to continue, ”he said.

Jack predicts that rooms equipped for video conferencing, modular office furniture and open-plan workspaces are trends that will continue to define office spaces in 2022. One of the largest banks renovates and equips only 60% of its offices. meeting rooms with the latest conference technology. because it more anticipates this meeting format but less demand on conference rooms overall given the lower occupancy levels of the building. “Usually these meeting rooms are used by staff to meet in person or to work as a team,” says Jack.

4. Seeking Yields in Response to Rate Hikes

The recent increase in the repo rate by 25 basis points to 3.75% will have an impact on investor confidence and real estate demand. “The industry is working hard to recover from the effects of the Covid-19 pandemic and rising repo rates are expected to present its own share of challenges. “

Jack urges owners to prepare accordingly. “Rate hikes impact yields. Yields are used to determine the relative value of a commercial property. However, there is still an opportunity for sellers to capitalize as they find an owner-occupier who is looking to purchase the property at a high price point. “

“With this in mind, it is important to note that when buying a property, investors will consider the return because they benefit from a higher spread between the return at which they can get the property and the best interest rate at which they can finance it. As interest rates rise, this bridges that gap until yields adjust upward accordingly. “

5. Mixed-use developments are on the rise

Commercial real estate developers are responding to the consumer trend to place greater value on lifestyle and convenience by building mixed-use developments that combine retail, residential and commercial in one building. “The residential real estate industry has experienced a boom since the start of the pandemic, an increase made particularly striking compared to the challenges facing commercial real estate,” said Jack. “Commercial developers are looking to capitalize on this by building mixed-use developments that will attract a new market and bring much-needed revenue to the industry. “

A number of prominent mixed-use developments will begin construction in 2022, including River Club in Cape Town and Saxon Square in Johannesburg.

6. Well-run cities generate increased investor demand

“The municipal elections that took place in 2021 could boost investor confidence in some cities in 2022,” says Jack. “Properties located in well-managed areas with exceptional service delivery will be in demand in 2022. Here, areas such as the Western Cape will continue to benefit from investor demand,” he concludes.

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