Digitalising Real Estate Lockdown Real Estate Guide | Page 8

COVID-19
Change the game
How COVID-19 will affect the industrial
property market
Platform: digital
T
Issue: COVID-19 e-book
he COVID-19
hurricane
Section:
Upfront has engulfed the world and all processes are labour intensive. Many industrial companies in
businesses are entwined in a whirlwind of uncertainty.
lockdown have a very high labour-to-sales ratio, translating to
Page:
4&5
In South
Africa,
with the lockdown of shopping malls,
labour being a very significant monthly cost item. Much of the
a lot of discussions
have revolved around the major retailers
industrial workforce are “blue-collar” workers who financially
Sources:
and the listed property funds. But, there has been minimal
survive on a week-by-week basis and with no income coming in
commentary The
on COVID-19
how the lockdown
is affecting
industrial-
businesses
will very quickly
themselves
hurricane
has engulfed
the world
and all businesses
are find
entwined
in a in financial trouble.
based businesses and industrial property owners, and what
Any
suspension
of
salaries
will
be
disastrous
their employees
whirlwind of uncertainty. In South Africa, with the lockdown of shopping malls, a lot of to
dis-
the future may hold.
and the family members that many of them support.”
cussions have revolved around the major retailers and the listed property funds. But, there
has been minimal commentary on how the lockdown is affecting industrial-based busi-
Tony Bales of Epping Property says that even before the
Epping Property continues that with industrial businesses
nesses and industrial property owners, and what the future may hold.
coronavirus, the industrial property sector had been enduring
taking strain, many of them will find it difficult to pay their
tough economic times.
landlords their rentals.
Tony Bales of Epping Property says that even before the coronavirus, the industrial proper-
“In the last
7 years, had
vacancy
were tough
at record
highs, times.
“The JSE listed property landlords have their backs on
ty sector
been levels
enduring
economic
rental growth was slowing and new industrial developments
the wall as they have bank loans they need to service, plus
and business v confidence
at record lows,” levels
says Bales.
investors
promised
a slowing
rental return.
,In the last were
7 years“acancy
were at record
highs, they’ve
rental growth
was
and In a nutshell,
most landlords
loans lows,”
on their
properties
new industrial developments and business confidence
were at have
record
says
Bales. which require
The latest Epping Industrial Property Index (below) for the
monthly repayments and many private landlords also rely on
quarter ending 31 March 2020 depicts this situation.
monthly rental income to live on,” He says.
The latest Epping Industrial Property Index (below)
for the
quarter ending 31 March 2020 depicts this situation.
RENTAL ASSISTANCE
RELIEF PACKAGE
Now, after entering 2020 and more recently, COVID-19.
According to Epping Property, the solutions can only lie with
While the larger food-related and pharmaceutical businesses
industrial businesses communicating and being open and
have generally
continued
to maintain
a form
of recently,
financial COVID-19.
honest with their landlords and bankers, and landlords being
Now,
after entering
2020 and
more
continuity, the
vast the
majority
of food-related
industrial enterprises
have not
open
and honest have
with their
bankers
and investors.
While
larger
and pharmaceutical
businesses
generally
continued
to
been as lucky.
Epping a Property
that
in South Africa,
maintain
form of advises
financial
continuity,
the vast majority of industrial enterprises have not
many industrial
businesses
felt Epping
the pinch
as far back
as January,
“In the
medium-term,
businesses
need premises to operate
been
as lucky.
Property
advises
that in South
Africa,
many industrial
businesses
when the supply of goods from China significantly dried up.
out of, and landlords need tenants. Everyone needs bankers.
We are all in this together, and solutions need to be sought that
Companies that relied on important components simply
satisfy both the short-term requirements of both parties and
had their manufacturing or supply chains grind to a halt. Now,
also look towards the medium-term.”
as China appears to be getting back to business, the lockdown
in South Africa has further hampered local companies.
“The whole industrial property sector is currently in turmoil.
Certain businesses will not survive. Most businesses will feel
“The majority of industrial businesses form part of a
a large amount of disruption and financial pain. Jobs will be
larger supply chain. For example, clothing, if manufactured
lost. Industrial landlords will collect less rental income. Short-
locally, has to be packaged and packaging companies are on
term, industrial property vacancies will increase and industrial
lockdown. Additionally, packaging has to be printed, printing
rentals will fall.”
company is in lockdown, suppliers of printing inks and finishes
are on lockdown. Finished product has to be transported,
“The world, as we knew it has changed. Industrial
transporters and couriers in lockdown, product has to be
businesses, industrial landlords and the banks will all need to
warehoused – warehouses in lockdown,” Adds Bales.
find short-term solutions that can be accommodated by all
parties, as all parties need to survive and co-exist in the longer-
As can be seen - for every product, there is an extensive
term,” concludes Epping Property.
supply chain that most people don’t think about.
“The nature of businesses in South Africa is one where many
6
COVID-19 - 2020
SOURCE Epping Property
COVID-19 - 2020
7