TOUGH TIMES

Real estate deals stall as Covid-19 ravages economy

Organisations considering flexible workspace policies

In Summary

•40% of office leasing deals under negotiation at the onset of the Covid-19 pandemic face delays while 30 per cent remain on hold.

•76 per cent of respondents have indicated that their organisations intend to implement social distancing policies upon resumption of business.

Dunhill towers and Goodman building along waiyaki way in westlands Nairobi on March 13,2018./EZEKIEL AMINGÁ
Dunhill towers and Goodman building along waiyaki way in westlands Nairobi on March 13,2018./EZEKIEL AMINGÁ

At least 40 percent of office leasing deals under negotiation at the onset of the Covid-19 pandemic face delays with 30 per cent on hold, a market survey shows.

The survey by agency and consultancy company-Knight Frank, released yesterday, indicates the real estate market remains vulnerable to the economic effects of Covid-19.

The immediate stress in the office market is accentuated by the fact that only 20 per cent of signed leases are proceeding as planned, the survey conducted between June 1 and July 3 shows.

Thirty per cent of the respondents however indicated that the current pandemic would not deter them from investing in commercial office spaces in the future, while an equal 30 per cent remain uncertain of the pandemic's impact on their future investment decisions.

As the continent braces itself to adapting to the new normal, an overwhelming 70 per cent of the respondents have already adopted a post Covid re-occupancy strategy to ensure business continuity.

76 per cent of respondents have indicated that their organisations intend to implement social distancing policies upon resumption of business leading to reduced density in their office.

"While we are unlikely to witness an extreme shift to remote working, flexibility, and collaboration are going to be core values to any organisation going forward,” said Tilda Mwai, Researcher - Africa, Knight Frank.

Opinion remains divided on the types of workspace models to be adopted moving forward.

48 per cent of the respondents strongly believe that organisations will consider moving away from the traditional real estate workspace model and implement flexible workspace policies more aggressively.

About 43 per cent believe that the type of workspace model adopted will vary for each organisation.

 

While globally the accelerated adoption of remote working is expected to filter into normal work life after the resumption of business as usual, 48 per cent of the respondents expect 75 per cent – 100 per cent of their employees will return to work on a full-time basis.

Subsequently, only 19 per cent of the respondents expect to reduce their amount of office space occupied.

“Going forward, while the pandemic is expected to lead to a new normal of remote working, the need for physical space in Africa remains dominant even as organisations embrace the values towards collaboration and flexibility,” the survey reads in part.

Fast food restaurants, healthcare-related retail tenants, and full-service restaurants are anticipated to be the quickest sectors to recover from Covid-19.

Real estate is among sectors hard hit by Covid with at least 450,000 jobs lost in, including casual labourers, with more than 5.9 million jobs affected across different sectors.

“Only 25 per cent of construction sites are operating. Other businesses impacted include real estate agents, valuers, property management and security,” Kepsa, led by CEO Carole Karuga says in a recent report.

61 per cent of the respondents in the Kight Frank survey indicated that disruption in supply chains as a result of lockdown measures had significantly impacted their ability to fulfil the demand for products leading to additional financial stress.

As a result of the crisis, retailers are expected to feel the brunt of the crisis more severely.

“Africa’s retail performance has previously remained fragmented across different markets. As a result of the current pandemic, the retail sector in general is expected to remain under pressure in the short to medium term,” said Marc Du’Toit, head of retail.