What commercial property owners can expect in 2021

Published Jan 3, 2021

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Flexibility and affordability are predicted to be at the core of commercial property trends in 2021 as businesses and employees adapt to the country’s prevailing economic and social climates.

Even if the remote working trend subsides in comparison to the momentum gained this year, it does not mean that the business sector will forget the lessons of 2020.

Adaptable and basic practices will still be the order of the day.

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A recent survey by Global Views, comprising of 555 respondents in the commercial sector, indicates that the major trends expected in the real estate sector include flexible office footprints and lease contracts, states Galetti Corporate Real Estate chief executive John Jack. An overwhelming 97% of respondents believe that large corporate tenants globally will aim for a portion of flexible office space as a result of the pandemic.

“This will allow companies to act more nimbly and adjust quickly to maximise benefits and cut down on costs.”

Flexible lease contracts will also become the new normal, predicted 66% of respondents.

“As a result of the current climate, lease provisions and conditions are changing. We are seeing a rise in short-term leases presenting a greater risk for landlords, which may be adjusted with higher rentals for shorter terms,” Jack says.

While flexible work arrangements will remain the norm for some of 2021, he believes that this will turn around towards mid-year with major corporates driving the movement back to ‘business as usual’. However, for large companies who do not do away with remote working, c

o-working spaces are set to be utilised as a way to solve some of the challenges brought about by remote working. Jack says these spaces allow employees to work more flexibly while providing access to a professional work environment with technical amenities.

“Other benefits include improved productivity, a social and collaborative atmosphere, and cost-effectiveness.”

The collaborative or shared workspace trend is a fast-growing one as more South Africans look for convenience, coupled with affordability and flexibility, agrees Bruce Rogerson, asset manager for the Tower Property Fund.

“We have seen a distinct shift in patterns away from fixed-term rentals towards flexible workspaces. This was intensified by the arrival of Covid-19 and the uncertainty that some businesses have about the immediate future...

“Another perk to highly flexible collaborative workspaces is that businesses can grow and contract as and when they need, without having to factor in rental space and rental cost commitments associated with fixed leases.”

Long-term lease contracts, however, are predicted to remain normal, according to 41% of the Global Views survey respondents. Even though 2020 was the year of hard decisions, Jack says the benefits accruing to the landlord, of long-term leases cannot be disputed.

“We do however anticipate that South Africa will lag behind the curve. While short-term rentals in the commercial space are popular at present, they present greater risks for landlords and investors, who are looking for income security in the long-term.”

Ultimately, affordability and “basics” will likely be king in 2021 and a while thereafter says FNB commercial property economist John Loos. For buy-to-let residential property this means more developments for the affordable end of the market while, for retail property, it likely means that more affordable community shopping centres will be the sweet spot over the larger and more costly regional- and super-regional centres.

“But it also means that amongst smaller property classes we would expect to see unglamorous categories such as storage space outperforming, for instance, the hotels and leisure category – the latter’s demand being largely of a non-essential nature and unlikely to be strong in recessionary times, not even to mention the impact of Covid-19 restrictions and fears.”

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