In just a few short months, a number of new dynamics in the property industry have brought about new challenges for developers and landlords, says Marna van der Walt, CEO of Cushman Wakefield Excellerate.
Retail has been particularly hard hit – but, then again, given the general state of the retail industry in South Africa, that’s not surprising. We’ve seen seemingly institutional brands shut their doors, or rationalising space, and as one box tenant after another folds, landlords are left with big questions, the most pressing of which is: how do we fill the gaps? Most are looking overseas for answers, wooing brands that have huge international fan bases, so it may not be long before we see the likes of sports specialist Decathlon or construction experts Leroy Merlin take up residence in our malls. Others are encouraging big international brands that have already established a presence in South Africa to extend their scope: for example, Zara’s massive following among fashion fans seems a positive portent for the brand’s homeware division.
At the same time, mall owners are fighting on another front: online. Statistics show that online shopping is still in its infancy in South Africa, compared to other countries, but it’s certainly on the way up. For retailers with a bricks and mortar presence, it makes sense to migrate into the digital sphere; for online retailers who want to cement their status, a physical shop might help to consolidate a consumer following. Somewhere in between these two dynamics, mall owners must find a way to ensure their offering suits the needs of both. The result? An emergence of what international pundits are calling the ‘phygical’ space; a blend of the physical with the digital.
Will they be up to the challenge, given that many are giving what can only be described as lacklustre performance; an inevitable consequence in view of the similarly dismal showing of dominant, mid-tier and convenience stores? Only time will tell – but it’s possible that the only solution may be a complete reimagining of the mall concept. Since the consumer’s entertainment needs have changed – why go to the cinema when you can stream the latest films on your laptop? – along with their shopping patterns, it’s going to be difficult to realise the opportunities in an increasingly complex environment.
In the meantime, the office sector cannot claim any greater success. One of the main issues here is the growth of hot-desking and collaborative workspaces. At a time when the economy seems more supportive of freelancing and ‘gigging’, a monthly (or even daily) rate seems a preferable option for many – even corporates are choosing to site teams at such facilities, rather than paying for office rentals and the concomitant overheads.
Those that stick with corporate headquarters are doing little to bolster the situation; not when you consider that the amount of space required has reduced dramatically. This has less to do with the number of people employed than the number of square meters allocated to those employees: internationally, some companies have cut their needs to just 5m² per desk. This is in stark contrast to trends of just a few years ago, when companies generally budgeted 12m²-15m² for each employee.
The outcome? Often, the value of offices is overstated; added to this, many are receiving rent that is lower than the amount quoted, especially once rent-free periods have been taken into account.
On the one hand, there is massive densification of the workplace, and on the other, we have companies balking at the idea of costly rents. There is, however, a middle ground: the company that sees their premises not only as a workplace, but also as a statement. For these companies, the office building is all about lifestyle: it’s about being able to offer an in-house restaurant rather than a cramped canteen; a convenience grocery store where you can pick up the bread and milk on the way home; even an outlet to get your mobile fixed. For these occupiers, existing models of facilities management are inadequate. The upkeep of these sprawling and highly-specced premises is a full-time occupation, which explains why many landlords are now outsourcing these services to professional workplace management teams.
This is just one area where the value of professional partnerships can be seen. Many organisations have come to recognise that if they are failing to optimise a building’s value, an international partner may be able to provide the exposure to new markets and potential new tenants they need in order to realise better returns from their property assets.
That’s on the local front. For those wishing to take advantage of conditions overseas, an international partner is obviously a must, helping to mitigate the risks and costs associated with expansion into new markets.
With diverse skills, a thorough understanding of capital markets, a range of integrated services and cutting edge technology at their disposal, a professional services company can smooth the tumult the industry currently faces.
Cushman & Wakefield Excellerate
Tel: 011 911 8000