Will Covid-19 kill off Sandton and other swish business hubs?
When Covid-19 hit there was no doubt that the impact on SA would be huge. For the business community and its leadership, centred in the country’s economic powerhouse, Johannesburg, there were major concerns about the way in which the city could be affected.
Now that the country has passed its initial coronavirus peak, the city is springing back to life at speed. But numerous questions remain regarding the future of this formerly bustling urban hub. These include the future of Sandton as the most sought-after office hub, and the likelihood of infrastructure projects planned before the pandemic, such as the Gautrain and new highways, still going ahead.
These are questions cities around the world are asking, with varying degrees of optimism. Whether it’s a vision of a better, more affordable London or a dead New York City, devoid of the things that once made it magical, every major city is reckoning with its post-Covid-19 future. And rightly so. Cities aren’t just places where many people happen to live. They’re centres of wealth, innovation and creativity. When the world changes, they shouldn’t escape the chance to reimagine themselves.
Before imagining what a post-Covid-19 Joburg might look like, it is worth reminding ourselves where the city stood before lockdown. After the departure of then mayor Herman Mashaba, the DA lost control of the Johannesburg council (which it held in coalition with the EFF), meaning the new ANC-led council had been in power for just under four months when the country went into lockdown. Before that, there had been a prolonged period of contested power, which meant service delivery was already affected and long-term projects had been put on hold or were in the early stages of being handed over to the new leadership.
As the country’s economic powerhouse, the city had also been shaken particularly hard by the unprecedented levels of load-shedding and general economic stagnation faced by the rest of the country. Hardly surprising then that the commercial real-estate outlook for 2020 was already cautious. Covid-19 only served to highlight how deep some of these structural flaws were and we’re only now beginning to get an idea of how deep the economic impact will be.
But the way we work also changed. Companies that would never have allowed remote working before were suddenly forced to adopt this for the safety of their employees. And while most South Africans are ready to return to the office, many won’t ever spend as much time there as they once did. Many businesses have seen that employees can work remotely from home or elsewhere, causing them to downsize their office spaces as they look to reduce costs.
That doesn’t just affect how employers think about office space, but also the landlords they’ve traditionally rented from. It’s difficult for landlords to fill those vacancies. The higher the vacancy level, the more the property value drops, which forces the landlords to drop prices. If investors pull out because of the weak economic climate, the pressure increases further.
The shift in office behaviour won’t just affect landlords of smaller companies. While some corporates will undoubtedly retain their Sandton headquarters, it’ll be interesting to see whether they’re forced to find alternative uses for some of the space. It’s unlikely we’ll see the same level of construction as we have over the past decade or so for some time.
It may be foolhardy for any corporate to embark on a big headquarters construction project. A far better choice would be for them to have a few, smaller fully serviced offices across the city. These offices would give their staff the space to get down to work while also being closer to home, improving their work-life balance. Importantly, however, the offices should be professional enough to meet, and impress, clients, something that cannot be guaranteed in a work-from-home environment.
In this way, companies can achieve all the benefits of having office space available without becoming embroiled in the vagaries of commercial real estate. Should they do so, many of the city’s planned infrastructure projects — such as the Gautrain extension and highway upgrades — may need rethinking.
The truth is, Joburg has always embraced change, evolving from gold-rush beginnings to Africa’s financial capital. The city might not look the same after the Covid-19 lockdown, but it’s never looked the same for very long. Businesses should remember that and use the lessons learnt over the past few months to find new ways of working.
• Seinker is founder and CEO of The Business Exchange.
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