- 4 AX-listed Heartwood Properties is developing a hybrid office for its tenants.
- This office will allow workers who've moved further away from the city centre to still come to an office that's exclusively available to their employers.
- The first is being piloted in Somerset West, but Heartwood may expand this to other areas and Zoom towns in future.
Remote working has brought mixed reviews over the past year: on one hand, some trend analysts predict that the office is dead, while on the other, landlords laugh off the prediction of doom.
Somewhere in the middle, consensus is growing that a hybrid model could be more probable.
So 4 AX-listed Heartwood Properties did some market research among its tenants and is now about to launch a new office development to offer a hybrid working environment.
"I believe the office will make a big comeback. But what's changing is that we're going to see more innovative offerings and much more flexibility in terms of office solutions. Combining work and lifestyle is going to be an increasing trend," said Heartwood Properties director Andrew Utterson on Friday.
Nestled in Somerset West, Heartwood's new hybrid office, called Sunvlei, is situated in the Paardevlei precinct, close to the Strand Beach and the Paardevlei Nature Reserve - the kind of place people have been semigrating to as remote working removed the need to stay closer to the CBDs.
"We chose Somerset West for our pilot project because of this growing decentralised lifestyle-based living. We see that as a definite trend in terms of where people want to work from to have that nice work lifestyle balance," said Utterson.
The growing number of people moving to small seaside villages – now termed Zoom towns – means that more office workers aren't going to be able to go back to the office five days a week, even when Covid-19 has become a distant memory. But a growing body of research shows that people miss the human interaction the office provided.
So, Heartwood moved swiftly to pilot its hybrid office. Sunvlei will provide private office space for Heartwood's tenants, a shared business lounge and a co-working area for employees of those tenants. It's a little different from the co-working office model offered by the likes of WeWork and Regus in the sense that only employees of Heartwood's tenants will have access to it.
"In other words, clients get the best, the best of both worlds with a combination of their own private space where they can create their own identity and manage their own facilities, but then also have the benefit of the use of a business lounge and meeting rooms," explained Utterson.
The multiple tenants will contribute their pro-rata share of the space they occupy towards Sunvlei's running costs.
The company also sees this model becoming a solution to remote workers who stay far from their companies' offices when loadshedding strikes. More than 100 solar panels will be going on to the roof of the Sunvlei building, which will also have backup batteries and generators.
Heartwood said it is looking to roll out this model in other busy nodes like Fourways and Houghton in Johannesburg and Umhlanga in Durban. As the concept of Zoom towns grows, Utterson said this would be another ideal area to expand the hybrid office to.
"This is a perfect facility for those towns and cities, and we'll be looking to go there in the future," he said.
Growing in a sector shaken by the pandemic
The Sunvlei is a 2 000 square meter, R57 million office development. Such an investment into a new office building may surprise many as the office segment valuations have been going down due to rising vacancies that have forced some landlords to convert their stock into residential units.
But Heartwood has not felt the effects of tenant exodus that affected other landlords in the past year, raising office vacancy rates to 13.3% in the last quarter of 2020, the highest in 16 years. Utterson said because all of Heartwood's properties are developed in response to tenants' requests.
Most of its tenants also hold stakes in the buildings, making them more of joint-venture developments than outright leased properties. Through these joint ventures, Heartwood plans to grow its portfolio to R1 billion in the next five years.
Since its listing on 4 AX in 2018, the company has grown its asset base, but not as rapidly as it plans to do now. Its property portfolio grew from R121 million to R248 million in the past three years to February 2021.
"The opportunities we are finding are with businesses, so we keep a very close ear to the ground. We structure deals with users who want a new place with an office, distribution centre, or factory but don't want to be tenants. We specifically search for those opportunities," said Utterson.
He believes that this model, which has insulated Heartwood from most Covid-19 shocks, will continue to do so.