- Redefine Properties says some of its office buildings are now empty.
- The company is considering many options to put them into use again, just not converting them into apartments.
- But selling some of them may be an option.
Some of Redefine Properties' offices are now empty. The property company, which owns a handful of shopping malls and offices in Sandton - including WeWork - is battling the highest office vacancy rate in its history.
Office vacancies rose to 14.6% from 13.8% at the end of the company's 2020 financial year in August last year. When including vacant offices held for sale, this figure rises to 14.9%. Secondary grade offices that include older buildings and those not very well located had a vacancy rate of 24.2%.
While Covid-19 played a huge role in pushing vacancies to highs that Redefine hasn't seen in recent history, this has been a long-standing problem, not only for Redefine but the sector at large.
"Office is certainly a sector that is taking significant pressure, and that was even before Covid-19. That pressure continues," said Redefine COO Leon Kok.
He said over and above multi-tenanted buildings with large pockets of unused space; certain buildings were "completely vacant".
"We are either trying to let them, or those could potentially also be considered secondary grade and could be on our disposal list," added Kok.
He said some of Redefine's office assets have been vacant for some time now, and the company is exploring what to do with this redundant space. In 2020, Redefine sold its 22 Fredman Drive seven-storey office building at the heart of the Sandton CBD. It is now being converted into residential apartments by the developer that bought it.
CEO Andrew König said the assets the company chose to sell were non-core, and it has adopted a "very careful" stance on its disposal process.
Redefine's financial results booklet published on Monday shows that another office building in Rosebank is being held sale.
But the properties suffering from the structural shifts in the office market are a small portion of Redefine's office portfolio. König said 88% of Redefine's office assets were prime or A-grade properties, which is what tenants leaving from secondary grade buildings move to. Redefine has been actively disposing of these secondary grade offices for years now.
Over and above possible disposals, Redefine is looking at possible conversions of some of these offices, just not into residential apartments. Kok said Redefine doesn't have the capacity to do this, and it also doesn't have many buildings that lend themselves to that kind of conversion.
"We are exploring self-storage in some, and maybe multi-use facilities incorporating retail aspects into office setups and the likes. These are all initiatives that we are exploring not just to use the vacant space, but also to potentially make it more attractive to users," he said.
A return to the office
Redefine refuses to play to the narrative that Covid-19 has made the offices redundant and that the only way forward for landlords is to convert as much of their space into something else like warehouses or residential apartments.
Kok said there's already been "a big return to offices" and a "dramatic U-turn" from CEOs and other business leaders in terms of their long-term plans for the office.
While in the early days of the lockdown, many came out saying most of their staff will probably permanently work from home; many are now saying that working remotely all the time does not support a productive and engaged workforce.
Although Redefine didn't have statistics of how many of its tenants have returned most or all of their employees to the office, Kok said as schooling returned to normal, traffic volumes in Sandton and Rosebank have gradually increased, indicating that more people are going to their offices, even if it's not for a full day.
Kok added that Redefine is repositioning itself to offer a far more flexible office environment. This will mean being more accommodating to space requests, allowing those tenants who require less space to downgrade easily in future.
The company will also help its tenants reconfigure their spaces as their needs dictate, including accommodating those companies who want to have satellite offices for staff who will continue to work from home.
"One opportunity we are looking to explore is to see if we can potentially convert some of our space into flexible working options, similar to what we have seen with our existing tenant, WeWork," said Kok.
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