It was initially anticipated that the retail sector would be the most affected due to the lockdowns and the subsequent inability to trade. There were casualties, but many malls and most of the smaller centers have, in fact, fared relatively well during the last 14 months or so. This may be attributed to landlords acting swiftly with rent reductions, deferments, etc. and, as a result, many retailers have managed to stay afloat, thereby preserving the rental income of the asset. It is instead the office sector that has been the hardest-hit asset class in South Africa, and the pressures are not expected to ease in the coming months. The fallout in the office market has seen property and rental values recede sharply. In the early stages of the pandemic, several occupiers held firm and retained space during the lockdowns. Landlords were therefore still receiving most of their income even from empty buildings, but vacancies are now rising as occupiers decide they no longer need as much space.
In general, occupiers are seeking maximum flexibility, considering that their demand for space in the short- and medium-term is still relatively unknown or unconfirmed. Occupants want the flexibility to either work from home or to do so on a rotational basis. This would most likely be a long-term trend post the vaccination rollout. Occupiers are increasingly focused on understanding what the future workplace will look like and how that affects their existing real-estate structure. More and more corporates in this market are looking to not only optimize operational functions in terms of cost, but also in terms of the size of their requirements. it appears that property and rental values in the rest of Africa have not been as badly affected by the pandemic as in the case of South Africa, especially the office sector. It is expected that a rebound to pre COVID-19 levels could take until 2022 or beyond. One exception to the trend is industrial real estate, most specifically warehouses and logistics centers, which have gained value as investors snapped up buildings essential to the delivery economy. COVID-19 has upset real-estate fundamentals by changing how we lead our lives. Companies are already deciding they will need less office space than before, either because of staff cutbacks or because more of their employees will permanently or partially work from home. And the rise of e-commerce—along with small business closures—will create a glut of retail space in a country that already had too much of it.