In 2019, South African REITs were the worst-performing asset class on the JSE, and over the past year, the bourse’s Listed Property Index has lost half its value, plummeting 50 percent.
Office occupancy was already down year-on-year at the end of the first quarter of 2020. With the onset of the pandemic and the sudden shift from offices to home, workers were quick to adapt to tech-enabled daily communication and connection.
Technology enabled us all to understand that work is something you do, not somewhere you go. Millions of people find working from home works. Chief executives and their executive teams now also know that remote working fits into a leaner operating model, one that is more attractive in challenging economic times.
Covid certainly exacerbated an already tumultuous market. The property sector has been slower than most to adopt digital transformation which has left it – and its commercial arm especially – exposed and vulnerable.
Now, not a moment too soon, property technology, or proptech, has begun to disrupt and enhance the real estate market worldwide. A combination of intelligent technology and platform economics, innovative proptech solutions are driving businesses forward again and reinvigorating the commercial property sector.
Just as financial technologies (fintech) improve through automation, the delivery and use of financial services, so proptech is improving the way the property sector engages with its customers. Business performance specialist, Bernard Marr, said it best in Forbes earlier this year:
“PropTech is booming and changing the way we buy, sell, and interact with our properties.”
Proptech spans all things tech, from big data to drones but it’s in the AI space that we’re seeing a solution for the local office rental market that’s easing the transition of workers back to the office.
Dror Poleg, the author of Rethinking Real Estate, put it into stark perspective when he said, “Previously, companies had 100 percent of their employees at the office and contemplated how many of them could be allowed to work remotely. Now, companies are starting with 100 percent of employees working remotely and are contemplating how many of them should be at the office at all, how often, and for what purpose.”
We know that some companies – large and small – are vacating their offices permanently, opting for a full remote office experience.
Others are working on a staff rotation system, leaving them with many square meters of unused space.
Others still want a place for colleagues to meet and collaborate and invest in corporate culture, which creates an environment that spurs creativity and productivity. The problem is that permanent offices are expensive and risky in uncertain times.
What landlords – previously the stronger party in the relationship – need to understand is that tenants no longer want the product they used to sell. Instead, they want a service. That service is the enriching experience that creates a workplace culture that leads to all the good things that grow a business and a team, but at a lower cost and without long-term liability. It’s a simple Space as a Service model.
When augmented with proptech, the Space as a Service model does what Tinder did for the dating scene, Uber for a quick ride, and Airbnb for holiday goers – it bridges the gap between landlords and tenants via a technology-driven interface for property owners and potential tenants alike. It enables tenants and landlords to engage, match and make a deal.
The innovative tech-enabled proptech user experience – backed by AI and machine learning – brings employers back into the workplace by matching them to landlords and other companies that have space available to rent, typically in coworking and flexi office setups. Of course, like Tinder, parties must meet to confirm compatibility. Still, by the time the potential tenant has shortlisted the space they’re interested in and organised a tour, tech has already filtered in, and out, the flexi space that best meets their needs. Similarly, the landlord knows they’re meeting an interested match.
Technology can no longer be an optional vertical in the local property sector; it has to underpin everything landlords and tenants do.
Platforms like Australia’s Office Hub, which has just launched in South Africa, will act as the catalyst that drives the move to tech in the sector. In the process it will enable a return to the office, albeit in a different guise, and bring welcome relief to the commercial property sector.
Andrew Robinson is the co-founder and executive director at SiSebenza
BUSINESS REPORT