Trends set to define commercial and industrial real estate in 2023
Category Commercial and Industrial News
As we head into 2023, all eyes are on South Africa's commercial and industrial landscape to determine what forces will dominate our outlook this year. 3Cube Property Solutions, an expert in the commercial and industrial property sector, takes a look at some of the prevailing trends we expect to see this year.
Demand for logistics and warehouse properties
Changes brought about by the COVID-19 pandemic - specifically the massive rise of the online shopping trend - created an unprecedented need for logistics and storage properties. Added to this, the industrial and logistics property market has experienced a boom over the past decade or so, thanks predominantly to technological developments and an already-burgeoning e-commerce industry. Thanks to ongoing distribution and logistics requirements, there is currently a shortage of large (10 000 - 20 000m² and more) logistics facilities, and sellers or lessors of such properties can expect top returns on their investments.
On the other hand, retailers are focused on enhancing and expanding their physical footprint and 2023 may see a plateau in the demand for logistics and storage hubs.
The recovery and future of the retail sector
Following the discontinuation of COVID-19 regulations, consumers have returned to shopping centres, and retailers across the board are reporting higher turnovers - trends which are expected to continue throughout 2023. Simultaneously, key shopping malls are recording lower vacancy rates and new retail developments - mainly smaller strip malls - are becoming increasingly prevalent.
With both shopping centres and online shopping thriving, South African retailers are looking to deliver seamless omnichannel experiences for their shoppers, in which the same brand messaging is portrayed in-store, online and through services like click and collect. The Spar group is the most recent retailer to launch an on-demand delivery shopping platform - SPAR2U - to rival its counterparts which have established apps like Checkers Sixty60 and Pick n Pay ASAP.
Other developments we expect to see more of in 2023 include blurring of the lines between online and physical retail. In a recent article about priorities for retail success in 2023, BizCommunity cites the example of Woolworths, which recently piloted a service that allows customers to virtually try on clothing or makeup before making their purchases.
The resurging popularity of in-person property auctions
Due to the health risks we have faced over the past three years, face-to-face property auctions began to take a back seat to their online counterparts. These online auctions - conducted either on websites or on mobile apps - served to maintain the momentum that the idea of property auctions has been gaining in South Africa in recent years. As we move into 2023, in-person auctions - complete with their dynamic energy and excitement - are set to take online auctions' place as the dominant trend. Arguably the biggest reason for the popularity of in-person auctions among property sellers is their tendency to fetch higher prices than traditional property sales.
The evolution of office space
Office vacancy levels in South Africa continue to be high, and the changes that have begun to emerge in the sector are expected to continue in 2023. The market is increasingly characterised by new ideas - and one of the biggest ones is "space as a service". Simply defined, space as a service refers to the provision of an array of services that enable tenants to use space optimally and productively. This range of services typically includes furniture, digital connectivity and fixtures - and can even include having staff on hand to assist the tenant in getting the job done. Those who use offices in this way tend to be "hot deskers" rather than tenants, paying only for the space as and when they need to use it.
Concurrently, there has been an increase in demand for B-grade office space, which refers to buildings that are small, often fairly old and with few amenities. Landlords are adapting these spaces to meet their needs, creating great opportunities for landlords in the B-grade sector.
The last few years have brought around whirlwinds of change - some anticipated and others not. 3Cube Property Solutions is committed to keeping you up to date with what you need to know - and equally committed to ensuring that your business's premises meet your needs. Contact us for more information.
Author: 3Cube Property Solutions
