The Covid-19 pandemic is set to have a negative ripple effect on South Africa’s commercial property sector as country shutdowns and economic declines hit global exports and imports.
But it could also offer opportunities for some sectors. “Just when we thought the world economy was going to improve, coronavirus emerged, and if it carries on like this it will definitely have an impact on the world economy,” says FNB economist John Loos.
Speaking at an FNB commercial property finance broker breakfast in Durban last week, he said China was a major trading partner for South Africa, and as production there had largely ground to a halt amid the spread of the virus, there could be dampened demand for imports and exports.
This will not only see South Africa’s exports to China being affected but also imports from that country which will, in turn, disrupt domestic production. Industrial property will be the first affected followed by foreign and leisure tourism.
Retail and leisure trade will also be impacted as people avoid shopping malls and cinemas. All of this can have a “substantial impact” on the country’s economy, and therefore the commercial property sector, Loos says. It is just too early quantify such impacts.
Addressing the country last Sunday, President Cyril Ramaphosa said the pandemic would have a “significant and potentially lasting impact on our economy”.
Announcing measures to try to prevent the spread, the president said the past few weeks have already seen a “dramatic decline in economic activity in our major trading partners, a sudden drop in international tourism and severe instability across all global markets”.
As people are encouraged to maintain social distancing, the spread of the virus - and the panic it is causing - could impact on the way people live and work in the long term, FNB’s Loos says. This could see trends emerging and remaining once the coronavirus spread is curbed.
Home entertainment services could see growth because of the need for social distancing. Picture: Mohamed Hassan
“The virus panic can pick up the pace at which technological advancements are embraced. Remote working could increase, and this may weaken the resistance of some employers to the trend. Once they are forced to make the change they could realise such practices are simpler and better.”
The pandemic could dampen demand for office and retail space and encourage e-commerce.
The call for social distancing could also offer “some benefit” for home entertainment products.
Org Geldenhuys, managing director of Abacus divisions, a commercial property marketing and development company, says some sectors will benefit from the Covid-19 outbreak.
“The situation caused by people’s reaction to the coronavirus will favour tenants who are involved with the logistics, online retail, home delivery and entertainment industries. Landlords with tenants operating in this space can sleep well, while most other property owners are in for a rough ride.”
Geldenhuys predicts that tenants offering services in the business categories listed below will see bigger-than-expected growth.
Their sales will increase as the infection spreads throughout the country, and the resulting fear keeps people indoors and away from others.
Businesses that will see growth include:
- Online shopping and home delivery services for groceries, basic foodstuffs and consumer goods.
- Takeaway and fast food outlets with delivery services.
- Home entertainment services such as Netflix, Amazon Prime, and
- Google Video.
- Online streaming of live events and meetings.
- Internet and bandwidth providers.
- Warehousing, distribution, logistics and courier companies.
- Firms supplying antiseptic and bacterial control measures.
- Pharmaceutical manufacturing and supply companies.