Employees return to the office – giving landlords a headache

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The most recent FNB/BER Building Confidence Index shows that contractor confidence in South Africa lost all of its gains in the third quarter of the year, mainly due to declining sentiment among homebuilders following a slowdown in activity.

Subcontractor confidence rose to 45 in the third quarter of 2022, from 38 the previous quarter, while prime contractor confidence fell to 29, down 17 basis points from the second quarter.

Subcontractors noticed an improvement in the utility sector.

According to Siphamandla Mkhwanazi, senior economist at FNB, indicators from the real estate sector, especially the office market with its high vacancy rate, do not support this rise in utility.

“It’s likely that as more people return to the office, changes will need to be made to the workspaces.”

“Also, landlords/owners now have to take care of the maintenance of the building which they have been able to postpone for the past two years. This is not ensuring a sustainable recovery for the construction industry and is likely why construction subcontractors – more affected by additions, renovations and maintenance – performed particularly well this quarter,” said Mkhwanazi.

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The FNB/BER Building Confidence Index looks at the percentage of respondents in the construction sector – who are satisfied with the prevailing business conditions in six sectors, namely architects, metering, prime contractors, subcontractors and building materials manufacturing. The index can range from zero (low confidence) to 100 (extreme confidence).

Growthpoint Properties, one of South Africa’s largest domestic office renters with 161 properties, said office developments have been forced to change since the work-from-home trend took hold.

It said that in some cases, economic imperatives are driving companies to reduce office space. However, the sense that offices are no longer needed is falling out of favor as hybrid work patterns persist with some time in the office and other time and home.

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“Larger companies are returning their staff to offices with different strategies, some completely with others still on a rotational system. We are seeing smaller tenants who have left their offices before returning to the market.”

Growthpoint said the office sector is under pressure especially in Gauteng and Sandton, although it expects this business and financial center to recover in due course.

A BusinessTech survey of 3,130 readers conducted in June this year showed that South Africans are divided when it comes to work arrangements.

BusinessTech’s main readership includes professionals, executives, managers and chief executives. In total, 1,597 respondents (51%) said they work from home permanently or only visit the workplace occasionally. Another 5% of employees reported working remotely from another location.

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28% of respondents said they have returned to the office:

Architectural activity means good

Interestingly, architect activity has surged — suggesting construction work should improve from an extremely low base in the coming quarters, FNB said.

Mkhwanazi said architects have reported rising activity at the start of their business pipeline in recent quarters. Until now, however, little flowed through to other workflows.

“The work for architects has increased noticeably this quarter, especially in the areas closer to completion or approval of a building plan.

“This is encouraging, and while it is not a guarantee that the increased work experienced by architects will progress into the construction phase, it does increase the likelihood of a more meaningful increase in construction activity in the near future,” said Mkhwanazi.


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