Commercial property

The state of commercial property after the July unrest and recent flooding in KZN

The July 2021 unrest in parts of Kwazulu-Natal (KZN) and Gauteng and recent flooding in KZN damaged properties as the area was still recovering from Covid-19.

Over the past two months, the commercial real estate sector has experienced challenges that have threatened recovery from closures in 2020 and 2021.

The July 2021 unrest in parts of Kwazulu-Natal (KZN) and Gauteng and recent flooding in KZN damaged properties as the area was still recovering from Covid-19.

Malusi Mthuli, provincial head of KZN at FNB Commercial Property Finance, said the recent floods have made the road to recovery difficult on many fronts. He adds that municipal attention has now been redirected to loss of life and social priorities rather than rebuilding Kwazulu-Natal.

However, he agrees that this is the right approach as people have lost their properties. The government must give priority to the accommodation of KZN residents. FNB is working closely with government and key stakeholders to help affected communities. Additionally, affected customers have received the relief needed to return their businesses and homes to normal.

Mthuli unpacks some of the impact and silver lining following the recent floods and unrest in the housing sector:

Work interruption: The disruption to business experienced by the commercial real estate sector due to the unrest and flooding is immeasurable. The process of rebuilding the commercial sector to what it was before the unrest of July 2021 is still not complete and the recent floods have stalled it for a while longer. “Tenants and landlords suffered heavy financial losses. Owners have a better chance of recovery, but unfortunately some businesses will disappear for good,” says Mthuli.

Business insights: Surviving companies have a different view of the economy and business environment, therefore their space requirements may change. But there is a silver lining. The disruption to the port of Durban will have a positive impact on other port cities like Cape Town, Gqeberha and East London and the properties surrounding these ports.

Increase in space demand: KZN warehousing and logistics-prone property will attract more demand. They are likely to experience rising rents and falling vacancy rates as a direct result of reduced supply of space and longer storage periods.

“Overall, properties that have survived both the unrest and the floods will gain a competitive advantage in the market. The challenges in the office space are largely a direct result of the Covid-19 pandemic and the restructuring of the work environment towards working from home. The office market remains subdued, but office-to-residential conversions offer attractive alternatives to these challenges,” concludes Mthuli.