Vacant office spaces halt development

The office market continues to struggle, with an oversupply of space, especially in premium nodes, resulting in office development being “at a standstill” as developers diversify into the residential market with large-scale office conversions.

Poor office demand was exacerbated by the repeated lockdowns, as certain companies realised that staff could be productive working from home and started downsizing office space or completely doing away with it, explains commercial real estate agency Cushman & Wakefield BROLL tenant representation head Roxanne Fordyce.

In recent months, several corporates have realised that collaboration, innovation, mentorship and other critical measures of productivity require a physical presence. These companies are moving towards a hybrid model, while some are reverting to office attendance up to five days a week.

Increased load-shedding has resulted in more people going back to the office; however, a lack in business confidence has resulted in companies signing shorter office leases.

Some companies are also switching to coworking and serviced office-suite solutions, which provide the required flexibility and agility.

Large corporate users are also giving up multiple floors of premium-grade office space, providing other interested parties with numerous choices. Therefore, while there are increased occupancies in certain premium buildings, especially those that offer additional amenities, they are not necessarily subject to decreasing vacancy rates, adds Fordyce.

Companies’ reducing space – as a result of hybrid working models – is enabling them to relocate to better buildings at lower overall occupancy cost.

Meanwhile, engineering consultancy WSP Africa property and buildings MD Michelle Jackson explains that many businesses have turned to generators for resilience in their power supply, allowing for their entire power load to be accommodated on generators since the introduction of load-shedding in 2008.

Load-shedding continues to affect the way in which commercial and industrial properties are being developed; it is also damaging equipment, thereby increasing maintenance and operational costs.

In addition, the increase in the cost of fuel, combined with the Russia-Ukraine war and the reliance on energy provided by Russia, have negatively affected fuel prices and the availability of fuel.

This, as well as the negative environmental impact of generators, brings the use of generators for power resilience into question, says Jackson.

The compounding impact of these challenges is creating more need in the market for integrated and hybrid power solutions that include some form of renewable power – solar or wind – batteries and generators for backup power generation, and grid power for continual operations, especially for energy-intensive users.

Furthermore, energy-intensive businesses have the option to generate up to 100 MW of power without a licensing agreement with government. It is particularly beneficial to large power users, such as industrial plants or data centre campuses, and opens the industry to a variety of generating options.

Jackson adds that companies are also prioritising their energy loads. For example, industrial businesses are reviewing their processes to take advantage of off-peak power and are replacing and upgrading older equipment.

Eliminating nonessential power loads, such as keeping equipment running all day when it is only used or required partially will also make a significant difference, explains Jackson.

Businesses are also moving away from fully heated and cooled buildings by embracing passive heating and cooling solutions or decoupling their heating, ventilation and air conditioning systems from fresh air supply.

Net-Zero Building Potential

Fordyce says industrial tenants globally are looking for smart solutions in new developments to meet demand for a reduced carbon footprint.

Therefore, new industrial developments present an opportunity for structural and technological advances in facilities, with an emphasis on decreasing energy and water consumption, and efficiencies in building design.

The Green Building Council South Africa’s changes to the Existing Building Performance rating tool to allow for the inclusion of industrial facilities is indicative of the increased demand for cleaner and greener factories and warehouses.

Jackson explains that net-zero has become a global trend gaining local traction as developers and tenants look for greater resilience and less reliance on State-owned utility Eskom.

However, the growth of net-zero or green energy buildings will mostly depend on architectural designs and client requirements, as well as funding.

There is also a need for greater emphasis on environmental, social and corporate governance reporting for reputational purposes, of which net-zero will be a key component.

She notes that the same net-zero goals in the reduction of embodied carbons in building materials are not achieved in the local market, especially as the Sustainable Development Goals are not well reported.

There will be more interest in renewable energy going forward if green star-rated buildings – mostly found in the government sector – can be presented to, and used as examples for, the rest of the industry.

Fordyce says South Africa’s expensive and unstable power supply has resulted in an increase in the implementation of renewable-energy sources, while the entry of energy-intensive users, such as data centre companies, into the local market will put further pressure on establishing viable long-term renewable-energy solutions.

The implementation of a diversified power mix will reduce downtime and improve production, resulting in an overall improvement to the country’s economy, concludes Jackson.