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E-commerce give industrial sector a boost

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The pandemic will affect various property sectors differently, with commercial and big malls in for tough times

The commercial property sector has taken significant knocks as a result of the Covid-19 pandemic but experts are confident it will recover. The recovery journey, however, could take as long as three years, says Rick de Sousa, commercial property finance executive at Fedgroup.

“I expect the next three years will be critical to our recovery, and that we should expect an upward tick after that. I believe the silver lining is that we could be in for a market correction in favour of new entrants.”

A number of early trends are emerging in the commercial property market as more companies prepare to go back to work, says Org Geldenhuys, managing director of Abacus Divisions. Investors and business owners can plot their recovery journeys or investments using these trends.


In the office sector, clients are expressing a need to downscale their physical office space from pre-lockdown requirements, Geldenhuys says. Working from home is now a reality for many, while those who have to run an office feel they can make do with much less space than before.

“In our latest office space inquiries we’ve seen the actual requirements drop by 50% or more. Some companies are even giving up their office space as they’ve become accustomed to the work from home phase and it works for them.”

De Sousa believes this market is “ripe for repurposing”. “Under a strict lockdown and fear of infection, it’s understandable that nobody wants to be in an office right now. In fact, communal spaces could be an indulgence for a long time. “Property owners are going to be forced to repurpose their property assets. They can’t sit with indefinite vacancies. The move from office to residential seems the natural one.” Furthermore, as employee distancing protocols will require larger offices for similar numbers of employees, or the same space for fewer employees, says John Jack, chief executive of Galetti Corporate Real Estate, companies will increasingly use flexible workspace to service their office requirements.


Early indications are that smaller and neighbourhood areas will be the place where retailers will look for space, Geldenhuys says. Big retail, on the other hand, is in for a difficult time.

“The notion of buy locally and support locally will be a strong trend coming out of the travel restrictions and other protection measures against the pandemic. We are going to be living, working and shopping close to home for a long time.”

Big malls have not been delivering fantastic returns but De Sousa says they have always been considered solid properties. But we have “far too many” malls. “As a country, we build more square meterage of malls a head than even the US, the inventor of mall culture. We have over-invested in big malls, even prior to Covid-19.”

Following the pandemic, people will avoid congregating in large open areas for a long time, he says. Convenience retail – smaller shopping centres with community retailers like grocery stores, hair salons, pharmacies, takeaway outlets and other smaller shops – is the “new golden opportunity”.

“These are the places where people can go in and out with less human interaction and crowding. This is where we will find growth in the foreseeable future,” De Sousa says.

Jack adds: “E-commerce will be a necessity for business going forward, so if you are building a business now that can’t be run online, stop.” Constrained consumer incomes will be another challenge for retailers, says FNB property economist John Loos.

“In this deep recession that appears to be unfolding, the employment loss and decline in real incomes appears to be severe. While curbing the spending of many who have lost jobs and incomes, it is possible that this can also frighten those households that have not suffered a loss of employment or income.” Widespread concern among households over their longer-term financial future could cause the household sector to meaningfully increase its savings rate. 

This savings rate in a time of income decline or low income growth will put pressure on household consumption expenditure and retail sales growth, Loos says.


Prior to the lockdown, industrial property was performing better than retail and office with real growth and, in a post Covid-19 market, De Sousa says the sector remains resilient as it is linked to essential services and supply chains.

“Coming out of lockdown in a phased approach, manufacturing and industrial businesses will be the first to reignite the fires to kick-start our economy… This is a property market that we should all be keen to fund, given that it poses the most immediate returns.”

Furthermore, the government’s R500 billion Covid-19 package should filter more into the industrial property space than office and retail, with sectors such as mining, manufacturing, construction and associated supply chains likely to receive assistance first.

“The full re-opening of e-commerce recently announced also counts in the industrial sector’s favour, providing more certainty for landlords of warehouses and manufacturing facilities, especially if some of the trade that has been lost in the retail space can move online. Innovation in e-commerce could have a potential positive effect on the industrial sector.” Warehousing, distribution, freight and logistics business is still in demand, agrees Geldenhuys.

“This is no surprise as everybody was forced to start looking online for purchases and product delivery for their daily needs.” But he adds it is too early to say what will happen in the manufacturing sector and to understand the impact on space requirements. 

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