South Africans not yet ready for the death of the office
• People want to work close to home but not spend all their time there, says property economist
The argument that most of us will work from home permanently in future is overblown as SA’s economy is not structured for it and people are more likely to work close to home instead, says property economist Francois Viruly.
A professor in property economics, investment and finance at the University of Cape Town, Viruly said in an interview that while many offices may be converted to residential property, given their oversupply, working at a desk in a building with other people is far from over.
“The honeymoon is over. Not everybody is comfortable working at home. People might not have access to a quiet work space and to the correct equipment. Further, some young people are desperate to access management for guidance. In turn, the management may want to oversee workers, and Zoom and Teams meetings aren’t always the most efficient way to do this,” he said.
Viruly was chief economist at the Chamber of Mines and head of research at JHI Professional Services, where he focused on valuations, research and legal services. More recently he was head of the School of Construction Economics and Management at Wits University.
He founded Viruly Consulting in 1999, and has since undertaken many real estate research projects in SA and other countries in Africa.
The SA commercial property market has taken a significant knock since businesses made the transition to working from home after the first lockdown was implemented in March 2020. Some large corporates have said they wish to cut space markedly in the next few months.
According to the SA Property Association, there are about 2.4million A-grade office spaces in prime city locations and B-quality affordable grade vacant office spaces, which is putting strain on the sector.
On Friday, Standard Bank said that it plans to cut head office and branch space by as much as a quarter by 2025. Chief finance and value management officer Arno Daehnke said head office and branch square meterage would be reduced 20%-25% and that would help the banking giant to cut down on costs.
But Viruly said there was some recovery in between the first and second waves of Covid19, with many office workers splitting their time between days in and out of the office. But the severity of the third wave and the slow progress of the national vaccine rollout have put the brakes on a swifter move back into commercial buildings.
“Many people wanted to go back to the office and were starting to do so, but then the third wave broke out. This placed pressure on office-owning landlords, who have struggled with record high vacancies,” Viruly said.
His research suggests people are still eager to return to the office. This offers a glimmer of hope to landlords who took strain as people worked from home, prompting some to slash dividends or to withhold them entirely.
The largest landlord in the country, Growthpoint Properties, with exposure to R71bn worth of SA assets, reported in June it was facing its highest office vacancies since it listed decades ago. Its office vacancies increased to 19.5%.
Growthpoint’s most significant concentration of offices is in Sandton, where 21.1% of the total office gross lettable area is located, with the biggest vacancy exposure at about 84,000m² or 25.4% of the total office vacancies.
Viruly said that residential and office space are merging with retail space as employees look for more opportunities to work closer to home rather than work at home.