Ghost Problems Terrify SA’s Real Estate Market Amid Pandemic Scares
Africans are definitely spending more time at home than they used to before the coronavirus pandemic.
As a result of this work-life culture shift, many office spaces, malls, cinemas, clubs and other kinds of popular spaces were shuttered. But, in South Africa, it seems ghosts now occupy buildings while people are working from home.
Take co-working spaces for instance, a market that became quieter than expected due to the current global health crisis. That potential cataclysm is just about enough material to contextualise the state of the real estate market of Africa’s most industrialised economy.
As of now, ghost vacancies are the latest nightmare in the sector, space provider attempt to wriggle of the effects of the pandemic.
Tweaking business model in a COVID-19-altered economy is pretty much bang on. But the way space leasing companies in South Africa are going about it has begun to stir concerns.
Ordinarily, a business now working from home owns the office space it previously occupied for as long as the rent lasts. But the leaders in the market are concerned that office vacancies are being forged to make more profits.
There are two sides to that coin. On the front end of the tender, some lessors are suspected to be offering currently leased malls, office spaces and shops to unsuspecting tenants. Meanwhile, the rightful occupants of those spaces are unaware, working from home.
On the flipside, tenants (whether individuals or businesses) may be sub-letting the spaces they currently occupy. Because the landlords of those properties aren’t aware of or green-light any of these transactions, the spaces are not counted vacant in the market.
Trying to start a new tenancy when there’s a valid one existing forms shreds of the reason these new market vices are called ghost vacancies. It puts office rent under pressure and further weakens the market. Apart from that, pandemic-sledgehammered South Africa is in the middle of a a potentially deepening recession.
Nigeria, Africa’s largest economy has officially exited a recession less than 6 months after it entered. But the economic struggles in South Africa—from SAA to Eskom and 5G spectrum wars to high-profile crypto scams—are in abundance, and in cahoots with the surging COVID-19 infection rates. Plus, there are reports of a new strain of the virus in the country.
Redefine Properties, a South African real estate outfit with over 300 large properties throughout its home market reports that the second wave of the coronavirus in the country triggered a litany of cancellations for short-term space lease contracts.
The firm, which also has office buildings in Sandton —an affluent area SA’s Gauteng Province—says the same wave has severely impact co-working spaces while a lot of other smaller operators have thrown in the towel. Indeed, Redefine admits that almost 15 percent of the entire spaces it owns are now running on empty.
Even WeWork, the American shared-space giant, has shrunk its occupancy in Redefine’s Rosebank Link building to just 62 percent. In 2019, WeWork freshly bought the entire space to market its first African expansion. Today too, at the 155 West Street building, WeWork now owns just 26 percent of the building.
The South African real estate market’s present doldrums are a million miles away from the previous decade’s housing boom. From 2000 to 2006, national house prices in the country rose by an average of 20 percent annually.
Featured Image: Art Station.
