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Letter from the editor Letter from the editor
AT A RECENT meeting I found it interesting that, when people were talking about what wealth AT A RECENT I found meant to them,meeting every single one itequated interesting that, when people wealth with owning were talking about what wealth property. meant to rising them, costs every on single one With many equated wealth with owning fronts, however, for some it had property. to be a choice between owning With rising costs onamany a property or building business fronts, however, forchildren. some it had or educating their to beOwning a choice between owning property is not aalways property or building business possible, and ayet, to or educating their your children. have a roof over head you property not canOwning call your own is isstill desired. always and our yet, country to Duepossible, to our past, have a roofmany over people your head has seen live you to a can own ishaving still desired. ripecall old your age never owned our past, ourhomes. country theDue title to deeds to their has to a Andseen oftenmany their people childrenlive and ripe old age never having owned grandchildren today are working the title theircreate homes. hard to deeds ensuretothey And often theirwealth children generational withand bricks grandchildren and mortar. today are working hardOn to ensure they create the other hand, generational wealth with interestingly, we have thebricks and mortar. world’s richest man selling off On the other hand, his property assets. It has been interestingly, we have the has reported that Elon Musk world’s richest man selling only one property left in hisoff his property assets. has been portfolio, which has Itgone on and reported that Elon Musk hasin off the market a few times only onemonths. property left in his recent portfolio, has gone on and And, which of course, we have a off the market a few times in growing issue of homelessness recent months. involving people who may have And, of course, had a home once, we andhave who a growing issue of homelessness don’t now, and others who have involving people who may have never had a home – whether had a home once, and who rented, shared or otherwise. don’tA now, and whoinhave recent lateothers bloomer never had aownership home – whether the house market rented, or otherwise. myself,shared I had thought I would bloomer in until be Aa recent foreverlate renter. That is the house ownership interest rates started market coming myself, I had thoughtpayments I would on down and monthly be a forever That is until a home loanrenter. were no higher than interest cominggiving the rent.rates Withstarted some banks down monthly payments on 110%and loans, it meant you could aalso home loanyour were no higher than cover transfer costs. the rent. banks So, I With took some the leap. Thegiving 110% loans, it meant youacould fact that I owe the bank lot of also cover your transfer money, that I now have costs. to worry So, rates I tookand the taxes, leap. The about property fact that I owe the a lot of values and upkeepbank of the home, money, that I now have to worry pales in comparison to the about and taxes, property feelingrates of owning property. values and upkeep of the home, However, I wonder if property pales in comparison to the ownership is always going to feeling of as owning property. of be seen the cornerstone However, I wonder property wealth creation? Whatifdo you ownership is always going to think? be seen asregards the cornerstone of Warm wealth creation? What do you think? Warm regards vivian.warby@inl.co.za
Vivian Warby
Vivian Warby
vivian.warby@inl.co.za
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OFFICE property owners must optimise costs and income as much as possible by looking for innovative ways to generate revenue. PICTURE: NG/UNSPLASH OFFICE propertyJIESUANG owners must optimise costs and income as much as possible by looking for innovative ways to generate revenue. PICTURE: JIESUANG NG/UNSPLASH
Office sector is Office sector is still in doldrums still in doldrums
Landlords encouraged to be innovative if their investments are going to pay BY BONNY FOURIE bronwyn.fourie@inl.co.za
Landlords encouraged to be innovative if their investments are going to pay
O O
WNERS of office properties will have to get creative if they want to dig themselves WNERS of office out of their Covid-pandemic properties willhole haveenough to to make get their property investments creative if they want work for to them. dig themselves out of now, says John chief theirRight Covid-pandemic holeJack, enough executive of Galetti Corporate to make their property investments Real Estate, the office market work for them. remains the “poor of the Right now, says cousin” John Jack, chief commercial property industry as executive of Galetti Corporate retailEstate, returns pre-Covid levels Real thetooffice market and the the industrial propertyofsector remains “poor cousin” the has remained resilient throughout. commercial property industry as can to seepre-Covid evidence levels of this retail“You returns in your day-to-dayproperty movements – and the industrial sector people are back in thethroughout. shops and has remained resilient restaurants butevidence you mayofhave “You can–see this noted although there is more in yourthat day-to-day movements – traffic, are there is not as much people back in the shops as and there was pre-Covid. restaurants – but you may have “People are still hybrid noted that although there isworking more and that means a significant traffic, there is not as much as number offices remain vacant,” there wasof pre-Covid. Jack says. “People are still hybrid working commercial property and Although that means a significant owners are usually less affected by number of offices remain vacant,” small interest rate hikes because Jack says. of lower gearing rates – a property financial Although commercial ratio that some form by of owners arecompares usually less affected owner equity (or capital) to funds small interest rate hikes because borrowed by therates company – they of lower gearing – a financial are affected by GDP growth or of ratio that compares some form declineequity because “directly owner (or this capital) to funds impacts vacancy and rental– levels”. borrowed by the company they “It’s theby underlying tenants are affected GDP growth or who arebecause more affected in their decline this “directly own businesses impacts vacancy that and ultimately rental levels”. determine the pressure “It’s the where underlying tenants will release.” who are more affected in their commercial ownGenerally, businessesJack thatsays, ultimately property owners are under determine where the pressure increasing pressure through rising will release.” rates and operating costs as these Generally, Jack says, commercial “continue to surge higher property owners areway under than underlying escalations”. This increasing pressure through rising effectively means a costs largerasportion rates and operating these “continue to surge way higher than underlying escalations”. This effectively means a larger portion
infrastructure viewpoint. of the total BY rentBONNY is being attributed FOURIE bronwyn.fourie@inl.co.za “And local governments are toward costs instead of the base actively seeking opportunities to rent, “which is what the landlord partner with developers ultimately infrastructure viewpoint. to leverage of the total wants”. rent is being attributed inner-city residential projects He advises property owners to “And local governments areas a toward costs instead of the base way of addressing growing social optimise costs and income, looking actively seeking opportunities to rent, “which is what the landlord housingwith backlogs.” for non-gross lettable area revenue partner developers to leverage ultimately wants”. However, he points out as a where possible. inner-city residential projects He advises property owners to investing in conversion projects “Cellphone masts and social is optimise costs and income, looking way of addressing growing not an automatic advertising arearea good housing backlogs.”ticket to riches. for non-grossboards lettable revenue “As with he anypoints property examples of this. However, out where possible. development, in any sector, “Deploy tech where investing in conversion projects is “Cellphone masts andpossible caution is required.” to reduce the people site not an automatic ticket to riches. advertising boards are on good Property entrepreneur managingofa this. building.” “As with any property and examples chief executive of Frankie Because lockdown forced development, in any sector,Bells “Deploy tech where possible Real Estate Grant Smee believes companies accepton a remote caution is required.” to reduce thetopeople site while many entrepreneur landlords want to workforceawas not only viable, but Property and managing building.” meetexecutive residentialofdemand, there are could also deliver improved chief Frankie Bells Because lockdown forced cost factors thatGrant should be considered and productivity efficiencies, Real Estate Smee believes companies to accept a remote says beforemany proceeding. Malusi Mthuli, KZN provincial while landlords want to workforce was not only viable, but one might have a are head also at FNB Commercial Property meet“While residential demand, there could deliver improved cost structure or physical building, Finance, the conversion of factors that should be considered and productivity efficiencies, says commercial spaces residential it’s stillproceeding. important to weigh up before Malusi Mthuli, KZNinto provincial units, although not a new trend, is whether property lendsaitself “Whilethe one might have head at FNB Commercial Property also onethe for conversion office property to conversion.” or physical building, Finance, of owners structure to consider.spaces into residential He suggests that following commercial it’s still important to the weigh up One of the driving forces factors are prioritself to units, although not a new trend, is whether theconsidered property lends behind this trend, he says, is the investing: also one for office property owners to conversion.” fact property funds continue to Location: Mostthat of the to consider. He suggests theproperties following offload large portions of their converted from office to residential One of the driving forces factors are considered prior to office stock, “which are in areas where there is demand behind this trend, hemost says, now is the investing: consider less funds viablecontinue from a returns for residential easy access fact property to Location: Most and of the properties perspective properties to amenities. offload largethan portions of theirin most converted from office to residential other stock, sectors”. It needs to where feel like home: office “which most now are in areas there is demand “Fortunately, offloading “While many and potential home consider less viablethis from a returns for residential easy access of office space somewhatin most to buyers will be attracted to the perspective thanisproperties amenities. serendipitous living a business other sectors”. given the significant Itprospect needs tooffeel likeinhome: upswing in demand welldistrict,many the property “Fortunately, this for offloading “While potentialwould homestill located properties have towill feelbelike home. to the of office residential space is somewhat buyers attracted that align with the the changing “It needs to beincomfortable, serendipitous given significant prospect of living a business lifestyles of an evolving working quiet, spacious and inviting, with upswing in demand for welldistrict, the property would still population.” easy to access located residential properties have feel to likeshops, home.restaurants saysthe prices of empty and“Itwalking routes. that Mthuli align with changing needs to be comfortable, office blocks lower than If the spacious structureand is right: You with need lifestyles of anare evolving working quiet, inviting, ever, and the costs involved to weigh up the costs of building population.” easy access to shops, restaurants in converting off-plan vs renovating an existing Mthuli saysthem pricesare of “far empty and walking routes. lower” than building them from property. You also need to consider office blocks are lower than If the structure is right: You need scratch, from a utilities parking, thethe property’s and ever, andespecially the costs involved to weigh up costs ofsize building
what’s available in the area in the same price bracket. Smee notes that while many landlords still want to area reinvent what’s available in the in the vacant properties, there are same price bracket. hoteliers who are looking Smee notes thatalso while manyto get in on the action. landlords still want to reinvent “Such partnerships vacant properties, there are are designed to fulfil the of to all hoteliers who are also needs looking parties get in oninvolved. the action. “The tourism sectorare is still not “Such partnerships up to speed and accommodation designed to fulfil the needs of all for travel remains seasonal.” parties involved. The current “The tourismpressure sector ison stilloffice not property owners is also being up to speed and accommodation revealed the number of new for travel in remains seasonal.” building plans being passed for The current pressure on office such properties. property owners is also being Johnin Loos, propertyof sector revealed the number new strategistplans at FNB Commercial building being passed for Property Finance, says while such properties. non-residential buildingsector statistics John Loos, property showed “positive growth” for strategist at FNB Commercial January, Finance, in squaresays metres of Property while building plans passed, non-residential buildingoffice statistics space planning completions showed “positiveand growth” for were thein“key drag” on overall January, square metres of non-residential building levels, building plans passed, office remaining low and compared to space planning completions pre-lockdown levels. were the “key drag” on overall “Office plans passed levels, declined non-residential building by 17.9% year-on-year in remaining low compared to January 2022 levels. off a very low base pre-lockdown a year prior.” “Office plans passed declined He says the low level by 17.9% year-on-year in of planned2022 new off office space January a very low base adevelopments, year prior.” despite some recent growth, is not surprising, He says the low level of with office nationally planned newvacancies office space at record levels. developments, despite some “Employment numbers in the recent growth, is not surprising, office-bound economic sectors with office vacancies nationally have declined at record levels.since lockdowns started in 2020, greater levels of “Employment numbers in the remote work are the future, and office-bound economic sectors moredeclined efficientsince use oflockdowns office space have through the ‘hoteling’ deskof started in 2020, greater of levels space iswork a keyare factor too.” and remote the future,
more efficient use of office space in converting them are “far off-plan vs renovating an existing lower” than building them from property. You also need to consider through the ‘hoteling’ of desk DISCLAIMER: The publisher editor of this magazine give no warranties, guarantees assurances and makeisnoa representations regarding any goods space key factor too.” scratch, especially from and a utilities parking, the property’s size or and
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or services advertised within this edition. Copyright ANA Publishing. All rights reserved. No portion of this publication may be reproduced in any form without prior written consent from ANA Publishing. The publishers are not responsible for any unsolicited material. Publisher Vasantha Angamuthu vasantha@africannewsagency.com Executive Editor Property and Environment Vivian Warby vivian.warby@inl.co.za DISCLAIMER: The publisher and editor of this magazine give no warranties, guarantees or assurances and make no representations regarding any goods Bonny Fourie Design Kim Stone reserved. kim.stone@inl.co.za orFeatures services Writer advertised within thisbronwyn.fourie@inl.co.za edition. Copyright ANA Publishing. All rights No portion of this publication may be reproduced in any form
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without prior written consent from ANA Publishing. The publishers are not responsible for any unsolicited material. Publisher Vasantha Angamuthu vasantha@africannewsagency.com Executive Editor Property and Environment Vivian Warby vivian.warby@inl.co.za Features Writer Bonny Fourie bronwyn.fourie@inl.co.za Design Kim Stone kim.stone@inl.co.za
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