The Changing Value of the Property Sector
The transitioning phase of the property sector has been an ongoing concern for many investors alike. All of whom have witnessed consumer behaviors drastically changing over the past decade. The Covid-19 pandemic has expedited these changes as more companies and individuals begin to adopt a ‘work-from-home’ approach. The result of which has caused commercial property values to plunge.
The property sector is changing rapidly and undergoing a transformation that has captivated the attention of many observers. However, the industrial property sector has scrambled through and managed to yield a positive total return, mainly due to investors having to pay a premium cost for long-term leases for more than 10 years into the uncertain future. The premium price paid by investors has unintentionally helped to mitigate the negative counter impact being felt by short-term lease agreements.
Notwithstanding, the industrial sector, which comprises of many sub-sectors and markets has shown a continued focus on ‘big box’ logistics, self-storage and sub-let industrial parks which has complimented consumer needs and resulted in steady, profitable gains. The tourism industry is still recovering from heavily imposed global travel restrictions, the majority of which are still well underway. The hotel sector together with the tourism industry has experienced severe negative impacts and most hotel groups are still not able to operate at full capacity, something which is required to make up for unsustainable losses.
The future success of the commercial property sector remains unknown and depends on whether employees will return to work post Covid-19. Presently, large office buildings in prime locations remain unoccupied. Examples include banks and other financial services. Meanwhile, residential property has fortunately experienced the benefits of the South African Reserve Bank’s decreased interest rate, which has resulted in easier credit access and increased bond approval rates. First time homeowners will agree that there are some positives in a crisis.
Furthermore, it has become apparent that a ‘micro-living’ trend has arrived on South African shores and is stimulating demand with annual house price growth up by 1.4% year-on-year in July 2020. Although research signals that the supply of properties remains stronger than demand, the gap has narrowed significantly.
The retail property sector is continuously changing and reinventing itself to meet the latest trends and consumer needs. Online shopping is being sought after as alternative shopping methods expand and rentals of large open space is no longer required.
The future of the property sectors remains uncertain. However, regardless of the expected changes, the demand for utilities and metering services will remain and potentially expand to serve each sector accordingly.
U Tech Dynamix remains innovative to serve numerous property sectors, by re-inventing and expanding utilities management services to compliment the already changed market – Christo Myburgh, CEO, U Systems (Pty) Ltd