Our team recently attended an online seminar hosted by WeWork which looked to unearth the future of co-working spaces and the Commercial Real Estate (CRE) industry as it stands.
There is no denying the historical volatility in the CRE industry over the last few decades. Because of this, we have become accustomed to predicting and preparing for market cycles, however, there was just no preparing for the magnitude of the Covid-19 pandemic.
Within just a few weeks, the country entered lockdown and every industry, business and individual has been adapting to the ‘new normal’ ever since.
It’s suggested that the market will take more than a decade to fully recover and the same can be said for our industry, however there are opportunities to be taken advantage of as demands evolve.
With this in mind, and in line with the WeWork seminar contents and our previous blog post (https://www.galetti.co.za/blog/2020/05/acclimatising-to-the-new-normal), we have compiled a list of more upcoming market trends to be aware of.
The Relationship Between Landlords & Tenants
Relationships between landlords and tenants are changing.
Landlords’ biggest goal is to protect and retain future revenues. This requires ongoing relationship building, negotiating, and engaging with tenants with regards to rental obligations and rates relief.
Tenants, on the other hand, are looking for value for money, flexible terms, and space optimisation. Tenants are also using representation and market data to re-negotiate escalations and rentals that are beyond market related value. In the case of SMEs, WeWork believes that they will revert to lower risk co-working spaces to ensure scalable operations.
A careful balance in the relationship dynamics between these two parties is required as they need to work together to ensure that a mutually beneficial plan is put in place.
Flexible Terms, Flexible Workspace
‘Flexi space’ is not a new concept. It started in the 90’s and has since accelerated to accommodate changing needs as the economy continues to put pressure on all businesses. Today, prime real estate is affordable and accessible thanks to this innovative concept.
Now that businesses have adjusted to their staff working from home, the market is expected to shift to flexible solutions such as co-working spaces. Suppliers such as WeWork will relook their space density model to offer a safe, contact free environment in which tenants and visitors can enter and exit freely and without worry. They will be guided by learnings from their international counterparts.
The traditional office, particularly for large corporates, will not fall away. We believe it will still remain a safe haven for colleagues, but it will evolve into a flexible, hybrid model.
To reclaim its stake in the corporate real estate realm, traditional office spaces will adopt a value-based system to provide unique experiences, catering to individual needs. The secret here lies in customisation and personalisation.
The role of real estate consultants will be ever prevalent during these times as companies reassess their current portfolios and plan for the future.
Retail and Logistics
Consumer spending is low, and the knock-on effects have been felt by the retail property sector. Anchor tenants are unable to meet their rental obligations and there has been a substantial decrease in trading densities during lockdown. It’s advised that landlords negotiate and provide new terms for these tenants during trying times.
On the other hand, logistic space, which is now considered the darling of the property sector, has enjoyed significant upturn in demand due to the rapid rise of e-commerce and Personal Protective Equipment manufacturing.
Whether you’re planning to upscale, downscale or re-look your current agreement, chat to our trusted team to help guide your decision making.