- Working from home is affecting more apartments around SA's busy commercial nodes.
- While Sandton led the pack in 2021 with empty apartments, areas like Rosebank and Midrand are feeling the escalating heat too.
- The Bolton in Rosebank saw its vacancy rate increase from 2.5% in December 2020 to 7.8% in 2021.
The prolonged period of working from home is affecting more and more apartments nestled around SA's commercial hubs. Emira Property Fund's only residential building, The Bolton in Rosebank, has seen its vacancy rate increase from 2.5% in December 2020 to 7.8% by the end of 2021.
Emira's COO, Ulana van Biljon, says she is not that concerned at this stage since the vacancy rate dropped to 5% in January. But because residential is the most sensitive part of the portfolio, landlords want companies to come back to the office.
Having worked remotely for almost two years now, many people didn't see the need to stay close to busy commercial hubs like Sandton and Rosebank. In fact, according to the TPN vacancy survey, Sandton had the highest number of empty apartments to date in 2021.
Van Biljon said the vacancy rate usually tends to increase at the end of the year because people go home or have different plans for the new year. So, she's still positive about the prospects of the residential property market in Rosebank.
"But we do need those corporates to come back as well. We did hear that Standard Bank might come back in March. But as I said, in the office sector, there is such a lot of uncertainty," said Van Biljon.
With predictions of a fifth wave for South Africa now, Emira fears that some of the companies that had planned the return to the office might push it back to a later stage.
As long as the driver of demand remains uncertain, landlords might have to brace themselves for the possibility that they might have to drop rent prices even further around some commercial nodes.
"It's not only in Rosebank. It's all over. The residential market is extremely rental sensitive. It's even more in that [income] bracket; people will move for R100 [less] a month," said Van Biljon.
The Bolton targets the mid- to lower-income market by Rosebank standards, with studio apartments starting from just under R8 000 a month. Van Biljon said Emira already reduced some of its rental prices in the past two years and added incentives like not requiring deposits to attract new tenants.
The return to office is imminent
The other reason Van Biljon is not that concerned about vacancies at The Bolton is because Emira is bullish that more companies will start returning their workers to the office.
Even though Emira's office vacancy rate has increased from 4.6% in 2019 to 18.2% at the end of 2021, Van Biljon said the company did not lose major tenants this time around. Many of the tenants who left vacated because of the landlord's legal action to evict them. Some tenants ran into financial difficulties and decided to close shop permanently.
But Van Biljon said Emira started receiving more inquiries about office space in the past six months.
While the company has accepted that the flexible working environment is here to stay, Van Biljon said Emira believes that the need for physical office space is not going away. Internationally, more companies are coming back to the office, and Van Biljon thinks it's only a matter of time before SA follows that trend.
"If I just look at the roads, they are definitely busier. When we look around our buildings, one business will be 100% back like we are. Other businesses are a bit more flexible … But are there more people working in our offices than six months ago? Definitely," she said.
Because of this, Emira isn't rushing to convert its offices to apartments. Van Biljon said in any case, the company doesn't have a lot of office buildings left.
Emira was ahead of the curve in converting offices to apartments, which is why The Bolton came to life even before Covid-19 struck. The company went through the exercise of identifying convertible office parks about five years ago. At that time, it only identified the Rosebank building, which became The Bolton.
Van Biljon said Emira went through an exercise again a few months ago.
"There might be one or two office parks that we are considering at the moment. But I think there is still a lot of wood to chop before we can come to market and say we think is another park we can convert," she said.