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The State of the Commercial Property post the July unrest and recent Floods in KZN

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Over the last couple of months, the commercial property sector has experienced challenges that posed threats to recovery following lockdowns in 2020 and 2021.

The 2021 July unrest in some parts of Kwazulu-Natal (KZN) and Gauteng and the recent floods in KZN saw properties damaged while the sector was still recovering from Covid-19.

Malusi Mthuli, KZN Provincial Head at FNB Commercial Property Finance says the recent floods have made the road to recovery difficult in many fronts. He adds that the focus by municipalities has now been redirected towards the loss of life and social priorities as opposed to rebuilding Kwazulu-Natal.  

However, he agrees that this is the right approach as people have lost their properties. Government need to prioritise accommodation for the residents of KZN. FNB has been working closely with government and key stakeholders to assist impacted communities. Moreover, impacted clients have been given the necessary relief to get their businesses and homes back to normal.

Mthuli unpacks some of the impact and silver lining following the recent floods and unrest on the property sector:

Business interruption: The business disruption experienced by the commercial property sector through the unrest and floods is immeasurable. The process to rebuild the commercial sector to what it was before the July 2021 unrest is still not complete and the recent floods have stalled it a little longer. “Both the tenants and landlords have suffered a great deal of financial loss. Landlords have a better chance of recovery, but some businesses will, unfortunately, be gone for good,” says Mthuli.

Outlook for businesses: The businesses that survived have a different outlook of the economy and trading environment, as a result, their space requirements might change. But there is a silver lining. Disruption of the Durban harbour will have a positive spin-off to other harbour towns like Cape Town, Gqeberha and East London and properties that surround these harbours.

Increased demand for space: KZN’s warehousing, and logistics inclined property will attract more demand. They are likely to experience an increase in rentals and lower vacancy as a direct consequence of reduced supply of space and increased storage periods.

“Overall, properties that survived both the unrest and floods will attain a competitive advantage in the market. Challenges in the office space are largely a direct consequence of the Covid-19 pandemic and the restructure of the working environment towards working from home. The office market remains subdued, but office-to-residential conversions offer attractive alternatives to these challenges,” concludes Mthuli.