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- Due to uncertainty around the future of work-from-home, Growthpoint's office vacancies have increased to 22.4%.
- But its retail sector is showing signs of recovery, with shopping centres reporting turnover growth for the period.
- Ster-Kinekor still owes Growthpoint R43.4m, while the company wrote off CNA’s total debt of R10 million.
Uncertainty around the future of work-from-home and moves by companies to cut their office space are pushing Growthpoint's office vacancies higher.
SA’s largest listed property company said in its trading update for the nine months ended 31 March that its office sector vacancies are currently sitting at 22.4%, a jump from from 19.9% in the 2021 financial year, and 21.2% at half year 2022.
"The good news is that the initial sentiment that offices would no longer be needed is receding with hybrid working patterns set to endure," the property giant said.
"Bigger businesses are returning their staff to offices with different strategies, some fully, with others are still on a rotational system. We have started to see smaller tenants that previously vacated their offices return to the market."
The company’s biggest office exposure is in Sandton, where 27% of its building space is standing empty.
"The office sector is particularly stressed in Gauteng and Sandton specifically, although we expect this well-established business and financial hub to recover in due course."
A big contributing factor to increased vacancies was Airports Company South Africa leaving the Riverwoods Business Park in Bedfordview. Growthpoint in turning that business park into a resort with luxury apartments.
TAKE A LOOK | SA's biggest landlord to turn Bedfordview office park into luxury apartments
While renewal success rate improved from 52.5% in 2021 to 55.4% at half-year 2022, it declined slightly to 53.1% as at 31 March as "tenants remain reluctant to commit amid uncertainty".
"What these numbers do not reflect, however, is how uncertainty is driving positive tenant retention, because businesses are unwilling to relocate until they have more clarity on their future space needs," it said.
"While we are retaining a high percentage of tenants, some have downsized, skewing the numbers."
Retail rebound
Growthpoint said the retail sector is showing signs of recovery, with shopping centres reporting turnover growth for the period. Smaller neighbourhood and convenience centres however outperformed bigger malls.
It said that due to better tenant trading, it provided less Covid-19 relief than expected. Arrears steadily improved from R148.2 million in 2021 to R106 million at the end of March, with the highest arrears of R43.4 million from Ster-Kinekor. Growthpoint wrote off CNA’s total debt of R10 million
The nine months reflected two distinct periods for the V&A Waterfront. Up to 31 December 2021, it was affected by low tourist numbers due to the Covid-19 restrictions and the UK travel ban. However, from January there was a fast rebound as the number of tourists in Cape Town increased, reaching over 70% of pre-Covid-19 levels by end-March 2022. V&A’s operating profit improved by 55% (R318 million) compared to a decrease of 19% (R210 million) on pre-Covid levels in the corresponding prior period to March 2021.
Floods and unrest
Performance of Growthpoint’s industrial portfolio improved, with vacancies dropping from 9.4% in 2021 to 6.2% at the end of the nine months to 31 March 2022. Most of the vacancies are in Gauteng.
Arrears decreasing from R73.9 million at half-year 2022 to R58.2 million at 31 March, "due to fewer business rescue and liquidation cases".
It said industrial tenants, especially those in KwaZulu-Natal were hit by last year July’s unrest and the recent flooding.
"In this province, five of our properties suffered damage from the riots and 13 of our properties sustained flood damage of roughly R20 million," Growthpoint said.
"We are fully insured for the damage and have already recovered the repair cost of the riot damage from Sasria."
Growthpoint said ongoing load shedding is a "continual impediment" to its tenants’ operations.
It said that in the nine months, it sold and transferred 26 properties for R1.8 billion, including selling Cintocare Private Hospital for R515.6 million to Growthpoint Healthcare REIT.
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