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The ripple effect of working remotely

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As the trend slowly catches on, it could affect office vacancies which are already high

Ongoing fuel hikes have left many employees concerned about the costs of commuting, weighing up the benefits of remote working – even just a couple of times a week.

If their companies agree, and the movement gains traction, the question is whether this will eventually impact on office vacancies – which are already high in South Africa. 

Although there are no statistics available for this country, Rode & Associates’ Erwin Rode says anecdotal evidence suggests there is a “growing minority of mainly independent knowledge workers and professional employees who work from home”.

However, these workers are “probably less motivated by the price of petrol than the time wasted while parked on major roads”. Furthermore, working from home is only a partial solution as not many job categories are appropriate for this.

“For instance, consider the need to train co-workers, the human need for social interaction, as well as the issue of trust between employer and employee.”

Quantifying the remote working trend in South Africa is not easy, agrees FNB property economist John Loos. His perception, though, is that it is “gradually catching on over time” – but it is not a rapid process. Developments such as connectivity and the roll-out of fibre to the suburbs, as well as the ability to video conference and Skype will make it easier to
connect people who work remotely.

Concurring with Rode, he says remote work is more suited to certain jobs. “So it’s a gradual process, but certainly in recent years in the banking sector I have seen an increase in remote working for certain job types.”

Judging the growth of flexi-time and remote working by its impact on traffic congestion, Loos says if there had been a “huge surge” there would have been a noticeable alleviation of traffic congestion, which has not yet happened.

He says he is not convinced that recent fuel price hikes will have a noteworthy impact on working remotely, unless they continue to rise on a long-term basis, such as over a number of years, which they don’t usually do.

Traffic congestion and rising fuel costs could see further growth of remote working. Picture: Nabeel Syed

Despite the caveats, Rode says: “I expect remote working to keep on growing, especially among professional women with children, as bosses become more progressive and learn to trust their employees.”

Over the longer term, Loos says an increase in remote working and new technology can lower demand for office space and lift vacancies.

“But that’s a more gradual impact at best I think.” The immediate challenge is simply the recessionary environment.

“And this I would expect to lower demand for office space in the near term, thereby lifting the national office vacancy rate further.”

Echoing this, Rode does not believe, however, that office vacancies will increase as a result of a trend to home working – not in the long run anyway. He says the reason for this is that new supply will adjust to a slightly lower demand for office space, holding all other factors constant.

“In the shorter term, I expect that office vacancies will stabilise at current levels, unless the economy was to tank. But ironically, the popular nodes, like the Sandton CBD, may for the time being experience growing vacancies as a result of its popularity with developers.”

Vacancy rates

The national office vacancy rate recorded by the SA Property Owners Association rose by 10 basis points (0.1%) in third quarter to 11.2%. Asking rental growth has slowed from 6.3% in the second quarter to 5.3% year-on-year for July to September.

Among the five largest metros, the City of Cape Town still holds the lowest vacancy rate at 7.2%. This rate, however, is a drop of 30 basis points (0.3%) from the previous quarter.

Cape Town is followed by:

Nelson Mandela Bay: 8.9%

City of Tshwane: 9.6%

eThekwini Municipality: 12.1%

City of Johannesburg: 12.8%

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