Workers are returning to the office – and it’s causing headaches for landlords
The latest FNB/BER Building Confidence Index shows contractor confidence in South Africa lost all its gains made in the third quarter of the year, primarily due to declining sentiment among residential builders on the back of a slowdown in activity.
Sub-contractor confidence rose to 45 in Q3 2022, from 38 the quarter before, while main contractor confidence stool at 29, down 17 basis points from Q2.
Sub-contractors marked an improvement in the non-residential sector.
According to Siphamandla Mkhwanazi, senior economist at FNB, indicators from the property sector, particularly the office market with its high vacancy rates, do not support this rise in non-residential activity.
“It is likely that, with more people returning to the office, there is a need to make changes to workspaces.”
“Also, landlords/owners now have to see to building maintenance which they were able to delay for the past two years. This does not make for a sustainable building sector recovery and is likely why building sub-contractors – more affected by additions, renovations and upkeep – fared especially well this quarter,” said Mkhwanazi.
The FNB/BER Building Confidence Index looks at the percentage of respondents in the construction industry – who are satisfied with prevailing business conditions in six sectors, namely, architects, quantity surveyors, main contractors, sub-contractors and manufacture of building materials. The index can range between zero (low confidence) to 100 (extreme confidence).
Growthpoint Properties, one of South Africa’s largest domestic office landlords with 161 properties, said that office developments had been forced to change since the work-from-home trend caught on.
It said that in some cases, economic imperatives are driving companies to reduce office space. However, the sentiment that offices are no longer needed is falling out of favour as hybrid working patterns endure with some time spent in the office and other time and home.
“Bigger businesses are returning their staff to offices with different strategies, some fully with others are still on a rotational system. We have started to see smaller tenants that previously vacated their offices return to the market.”
Growthpoint said that the office sector is particularly stressed in Gauteng and Sandton specifically, although it expects this business and financial hub to recover in due course.
A BusinessTech poll conducted in June of this year that looked at 3,130 readers showed that South Africans are split when it comes to working arrangements.
BusinessTech’s core readership includes professionals, executives, managers and chief executives. A total of 1,597 respondents (51%) stated that they either work from home permanently or just visit the workplace occasionally. An additional 5% of workers reported working remotely from a different location.
28% of respondents said that they have returned to the office:
Architect activity means well
Interestingly, there has been a sharp rise in architect activity – suggesting that building work should improve in the coming quarters off an extremely low base, FNB said.
Mkhwanazi said that over the past few quarters, architects have reported rising activity at the very start of their business pipeline. However, little flowed through to other work streams until now.
“Work for architects increased noticeably this quarter, particularly in the areas closer to the completion or approval of a building plan.
“This is heartening, and while it is not a guarantee that the increased work experienced by architects will progress to the construction phase, it does increase the likelihood of a more meaningful uptick in building activity in the not too distance future,” said Mkhwanazi.
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