While location used to be the key factor in picking a good property, the impact of Covid-19 will mean that innovation is likely to be just as an important factor for years to come, says Riyaad Khan, transactor in the Real Estate Investment Banking team at RMB.
While the full extent of Covid-19 on the South Africa real estate sector in the long term is unknown, Khan said the ‘old rules’ of property have already evolved.
Khan said that property owners are already repurposing properties, but this is just the start as demand for commercial space is likely to drop even further as a result of a systemic fall in demand from the pandemic.
“The Atholl Yards development in Sandton for example was an old office building that was recently converted into quality and affordable residential rental units.
“In this case, an office building which was vacant for a number of years is now home to a community of young professionals on the doorstep of the Sandton CBD.”
There are similar examples in nodes such as Sunninghill and Randburg where most of the old commercial space is being converted into affordable accommodation, he said.
Khan said that retail space is also changing with retailers potentially looking to reduce their floor space which will create unused space in shopping malls.
“Large shopping centres were already allocating more space to entertain and experience-based offerings before the pandemic and we now expect this trend to continue.
“It is very possible that we will see more non-traditional retail being incorporated into malls. Internationally this is a growing trend with major brands such as Tesla opting for a large footprint in high visibility malls across the globe.
“Redundant parking spaces are being converted to storage spaces, vehicle service centres and increasingly used as exhibition space for events.”
Khan said that shifts in real estate demand, particularly when driven by an event such as Covid-19, occur much faster than the market’s response to supply.
“It is in this window of opportunity where the most innovative owners and operators will thrive. We saw this play out in the wake of the global financial crisis and we expect similar this time around.”