Property360 - National Digital Magazine - 26 February 2021

Page 3

2 6

Letter from the editor IT IS hard to predict things in an unpredictable climate. How often have we heard: “We could never have foreseen what happened in 2020”? Economists and indeed some real estate heads are telling us that the trajectory at the moment is reminiscent of the market in 2008, although the difference is that 13 years ago we didn’t have the low interest rates that have helped us remain buoyant. The low interest rates have certainly seen more first-time home buyers enter the market after they do their figures and work out it is cheaper at the moment to buy than to rent. However, TPN Credit Bureau reports that not all is rosy for tenants, and many can’t afford to buy. A recent TPN survey showed 75% of tenants reported loss of income during lockdown. Giving them some reprieve, TPN has recorded a negative rental escalation of -0.75%. This is, however, a further blow to landlords, many of whom have been stuck with tenants who are not paying their rents and who refuse to move out since lockdown rules have made eviction difficult. But whether you rent or own, the property market is a wave we are all having to surf. And there have been some wins: some estate agencies report higher sales last year – even with three months of shutdown -– than in 2019, when the market was already on a downward slide. I bumped into a real estate expert yesterday and his understanding is that things will remain pretty much the same as they are for the next eight months with sale prices probably dropping even further. But then, towards the end of the year, he predicts an upsurge in buying particularly at the higher end of the market which has suffered most from recent events. Others worry about another black swan event that could absolutely turn everything around. An expert I chatted to yesterday said what we all deeply know: “Property is vital, everyone needs a roof over their heads.” So no matter what unpredictable things may come, what laws may change, the fact remains whether you buy or rent, live in a commune or have a community of sorts, or whether you finally are able to access parts of real estate you’ve been kept out of – a home is one of the basic necessities. Innovations in all forms – from laws to construction – will no doubt form part of our future. Buy, sell, rent, share, whatever, we hope you will have a safe and beautiful place to call home.

Vivian Warby vivian.warby@inl.co.za

F E B R U A R Y

2 0 2 1

33

Living in the office The trend towards converting work spaces into homes is growing and the pandemic, which has led to inreased working from home, has encouraged it BONNY FOURIE bronwyn.fourie@inl.co.za

The BlackBrick development in Sandton is a standout example of a successful office-to-residential conversion.

S

OME SOUTH Africans living in luxury apartments are unaware that the spaces used to be offices. In coming years, more vacant offices in central nodes are likely to be converted into entry-level, or even upmarket, apartments. This growing conversion trend first hit in the late 1990s, and while Cape Town, Durban and Joburg were the main metros targeted for these redevelopments, more than 30 years later, many decentralised nodes are also involved. This is in line with densification policies in major urban areas and CBDs across the country, says David Green, president of the South African Property Owners Association. Frank Reardon of Strategic Property Solutions says the “huge increase” in these conversions is primarily driven by the “chronic oversupply” of offices in nodes that are well located for residential units. “In addition to the cyclical oversupply of offices is obsolescence driven by changing work patterns. These include flexible workspace and hours; the increase in working from home that was accelerated by Covid-related lockdowns and safety protocols; and longer-term trends that create more efficient use of office space, including hot desking.” He says there has also been a huge shift from the primary areas being targeted for conversions, which used to be older CBDs and non-prime office areas. Now, decentralised nodes are also the targets. “Locations closer to office nodes such as Sandton have become sought after for units targeting the middle-income market. The Cape Town CBD has historically catered for upper-end units and the Durban CBD continues to target primarily entry-level and student housing.” Paragon Lending Solutions chief executive Gary Palmer says the decline in interest in B-grade office space became evident at least two years ago and since then there have been a number of conversions from old offices to residential living spaces. “I think there is more investment opportunity in this space.” He notes there are many such redevelopments in the social housing space as

well as for the purposes of providing smaller residential units. The banks are willing to lend aggressively to end-user buyers in the affordable market as well as provide development finance for these conversions, agrees Joel Rosen, managing director of IHS DevCo – a division of International Housing Solutions. The ability to convert these spaces to a livework-play offering – which is a huge demand driver at present due to Covid – gives the enduser a perception of value in areas that were otherwise inaccessible. “Developers with access to capital are able now to get decent returns in an otherwise stagnant property market,” he says. REQUIREMENTS FOR SUCCESSFUL CONVERSIONS Nodes that offer economies of scale where developments can build communities with amenities over time provide for successful conversion nodes, Reardon says. The Bree Street and Braamfontein precincts in Joburg stand out as successes. Rosen says the BlackBrick project in Sandton, and some of the newer conversions in Sunninghill, are examples of successful office-toresidential conversions. “These have been well thought out, use the space to a good level of efficiency and give buyers lots of value for money at affordable prices.” Green cites ‘The Bolton’ in Rosebank as another example of a good conversion, saying that this space was previously occupied by Sasol before the conversion into quality apartments with rentals from R7 500 to R9 000 per month. The Bolton is within 400m of the Mall of Rosebank and the prime Rosebank office nodes, and also offers access to the Gautrain. Factors such as these are all important in enhancing the appeal to tenants and owners of well-located residential accommodation. “The appeal also relies on the facilities that are added to enhance the offering. Here we think of serviced office, gyms, swimming pools, access to retail, childcare, good security and so on.” The area also needs to be able to support the levels of sales and rental pricing to get these

feasibilities to work, says Rosen. Green points to The Argyle in Craighall, Joburg, which is also a conversion, but to luxury apartments. “Today, many of its residents are unaware that it once was an abandoned office block in a stellar location.” WHERE TO TREAD CAREFULLY Limiting factors include the architectural suitability of office space and whether it is financially feasible to convert it to residential use. “Not all buildings are suited to conversion from a structural, economic or locational point of view.” Palmer says it is worth noting that the floor plans of some conversions “don’t make sense” or are not customer-focused. “For example, they build units but the toilet is in the wrong place or there is not enough light. In some cases the conversions even become too expensive. People think it’s easy to do a conversion but it is not.” OTHER OPTIONS FOR CONVERSIONS Palmer says shared office spaces for co-working or even hotels can be created from office space, while Green adds that conversions to hotels, leisure facilities, medical suites or services and mixed-use developments might also be attractive prospects. “The lower interest rate on bank debt is also facilitating viable conversion of property, including retail property, to other uses.” When undertaking conversions, Green points out, the initial cost of the real estate for conversion needs to be affordable to enable feasible alteration for other uses. “This is not always the case as the seller’s asking price often renders the conversion unfeasible, although time has a way of changing mindsets as market conditions weaken and prospects of office leasing in lower-quality office spaces diminish.” Rosen agrees conversions from traditional offices to smaller, shared workspaces work well. “In addition, large industrial units and retail spaces that are vacant can lend themselves to residential conversions, provided they meet the criteria we’ve mentioned.”

DISCLAIMER: The publisher and editor of this magazine give no warranties, guarantees or assurances and make no representations regarding any goods or services advertised within this edition. Copyright ANA Publishing. All rights reserved. No portion of this publication may be reproduced in any form without prior written consent from ANA Publishing. The publishers are not responsible for any unsolicited material. Publisher Vasantha Angamuthu vasantha@africannewsagency Executive Editor Property Vivian Warby vivian.warby@inl.co.za Features Writer Property Bonny Fourie bronwyn.fourie@inl.co.za Design Kim Stone kim.stone@inl.co.za


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.