Arrowhead Properties looks at converting office space

31 May 2021

South Africa's Arrowhead Properties wants to convert unused offices into residential or storage facilities as demand for workspaces in one of the continent's biggest financial hubs falls.

Lockdowns since early last year have forced millions of people to work from home, with many companies still working remotely or reducing office space, resulting in rising vacancies.

Landlords are being forced to adapt and come up with ways to retain tenants or repurpose office space to lower vacancies and boost rental income.

Presenting the company's results on Wednesday, 28 May, chief operating officer Riaz Kader said it would convert secondary office space above prime retail buildings and larger buildings that are no longer sustainable as standalone office assets.

"It's primarily going to be residential where there is demand. We understand there is pressure in the residential market so we're not just going to pull the trigger and convert, but where there is demand we will look to convert," he said.

Self-storage, mixed-use facilities

Other conversions under consideration are self-storage facilities and mixed-use facilities with retail, Kader added.

"We've got three projects that are under due diligence, one of them quite advanced," he said.

The company will also continue to revamp older and outdated offices to woo the post-pandemic workforce, as well as offer additional space to existing tenants as easing restrictions drive companies to chart a return with less hot desking, more room and tighter health regulations.

Arrowhead's office vacancies rose to 18.92% in the six months ended March 31 from 13% a year earier. A negative 13.79% rental renewal reversion rate reflects lower rental income on new leases compared to previous ones.

"The name of the game right now is flexibility and you have to adapt as a landlord. So the balancing act for landlords right now is about revenue versus tenant retention," Kader said.

Article published courtesy of BIZCommunity

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