The bruising is not over for South Africa’s landlords. In fact, analysts expect more severe pain is still on the way for the listed property sector as more retail tenants are buckling under pressure and some office leases would be up for renewal.
The property market has undergone huge changes as a result of the Covid-19 pandemic, but not all sectors have had the same experience.
As the year 2020 just passed, it is useful to have a look at how different asset classes have been affected and what lies ahead for them in the 2021.
The one sector of the economy that benefited from lockdown has been online retail outlets and this has also been good news for the manufacturers that supply them. An interesting twist to this is that some malls, which have battled, could be turned into distribution centres for e-tailers.
The hospitality industry was one of the hardest hit during lockdown as planes were grounded and borders closed. A slow recovery is discernible, but research puts a return to 2019 levels in only 2024.
Remote working was very nearly the death of the office, in fact, office buildings as an asset class have been the worst affected. Pay close attention as some companies may make remote working a permanent feature for at least some of their workers.
The stand-out best-performer of 2020 has been multifamily apartments. In the US, strong occupancy and collection rates, along with stimulus cheques and savings have boosted the asset class. Affordable financing deals have also driven up demand for multi-family offering.
Student housing is in demand as top-tier campuses absorb students from other schools. Also, as social distancing demands that on-campus housing reduce its occupancy levels the need for off-campus housing is on the rise (especially for buildings within 1.5km of campus).
Any medical building with tenants that offer critical care and procedures are worth considering, but those that offer optional care and procedures are less of a sure bet. Location and solid tenants, with clear longevity, are crucial when deciding to invest in these buildings, advises Scott Picken, CEO of online investment portal Wealth Migrate.
Many of the big retailers have simply refused to pay rent during the months when the shopping centres have been closed, pointing out that zero footfall means zero revenue but still many outgoings, notably salaries. Consumer behaviour has been changed, possibly irrevocably, so if you are looking at a retail asset make sure it has a strong supermarket as an anchor tenant along with two to three other good, solid tenants that will bring foot traffic to the shopping centre, which in turn will attract other good tenants.
Researchers expect there to be a significant demand for senior housing in four years’ time as the Baby Boomers start entering their 80s, this demand will then increase each year. When it comes to investing in senior housing, a good partner is always a must, so choose carefully.
An often-forgotten property class is self-storage, which is in demand, especially when it offers amenities such as heating, ventilation and air conditioning (HVAC) and good security. The needs and expectations of self-storage clients are quite exacting, so, again, a good partner can ensure you make a success of this.
The whole world is holding its breath as the slow roll-out of the vaccine heralds a return to normality, take note of the types of real estate you could pursue in the new year to ensure 2021 is be the beginning of fresh successes.
Source: SA Commercial Property News