While the South African commercial property sector has had a relatively sound, albeit occasionally bumpy past two decades, the Covid-19 pandemic has undoubtedly catapulted property as an asset class into very unknown territory. Other African countries have certainly not been immune to the challenges that the pandemic has brought.
The widespread uncertainties in the market mean that the stakeholders in the sector simply cannot hope to fall back on the tried and tested systems and approaches of the past and expect to achieve the same outcomes as they have historically. While we have seen some recovery to pre-Covid-19 days, the question we have to ask ourselves is: are we are striving to return back to the comfort of the old way, or is there an opportunity to reimagine the future in a very different way?
It’s a difficult paradigm shift to make, especially for a sector populated by a large number of traditionalists, who have done things largely the same way for a great many years and achieved notable success along the way. But adopting the “if it ain’t broke don’t fix it” philosophy that has seen property through previous economic downturns and sector crises just won’t cut it. The reality is that there are many things in the world now that are broken, and they will not work the same way as they did in the past. And, difficult as it may be to acknowledge, property is one of them.
The good news, however, is that the rapid transformation of the African property investment and development environment presents the sector with a unique opportunity to reinvent itself — and today, it has access to the technology and tools it needs to do precisely that.
This property technology (PropTech) is not new to the sector. Technology has long been a part of property finance, investment and development, but it has really only been in the last few years that the PropTech evolution has gained significant momentum. Unfortunately, unlike the broader financial services industry, which has embraced FinTech as a way of disrupting and evolving the way it operates, property role players have been hesitant to embrace technology to the same extent. But the events of 2020 are set to change that.
The simple reality is that the way the world works, and lives, has fundamentally changed. Ecommerce is rising, remote working arrangements are set to remain the norm for many businesses, and shopping as a pastime or form of family and community entertainment differs to how we remember it. The result is that across most commercial property sectors, a comprehensive rethink has to take place among investors, property funds, owners and landlords to figure out the best way to get back to sweating their property assets for maximum usage, occupancy and returns. Whether it is through repurposing, reconfiguring or rethinking digital strategies — or perhaps a hybrid approach — reinventing ourselves for the new world and changed consumer behavior is vital.
For most, this shift is going to depend significantly on much greater uptake and application of technology. This isn’t only true of the immediate interventions needed to deal with revenue losses caused by Covid-19. PropTech can, and must, play a key role in the mid- to long-term plans of all property stakeholders. So, in the short-term, the majority of property technology interventions will almost certainly need to take place in the facilities management space to ensure safe spaces and leverage innovation to expand offerings and channels for basic survival. However, in the medium to long term, the broad adoption of PropTech will be essential in order to deliver the massive and widespread changes that have to take place in the way that the built environment works overall, including every stage of development of that environment from construction and building maintenance to funding, management and even the repurposing of existing buildings.
A core aspect of this “purposeful property repurposing” will be the ability to identify inefficiencies and gaps in the market, and develop innovative solutions that transform those into growth opportunities. So, for example, a number of large regional malls in North America are struggling to attract customers, especially during the second wave of the virus. Their efforts have involved some interesting lateral thinking, including raising the appeal of these extensive malls as exercise destinations, and encouraging people to get their recommended daily step counts on their activity monitoring devices. It’s an appealing proposition, especially as the northern hemisphere enters its winter months. And it has the real potential to raise patronage for many of the retail and food outlets that would otherwise have faced the very real risk of closure, which creates significant problems for landlords as well.
While this is a very specific example of property repurposing, and doesn’t necessarily represent PropTech in the true sense of the term, it is a good example of how participants in the property sector need to start rethinking their approach to maximising the appeal and value of their properties.
From a pure PropTech standpoint, data obviously plays a key role in this process, and there is no shortage of data in the South African property sector. What has been lacking until now is the will and means to comprehensively analyse that data to disrupt, innovate, transform and achieve significant scale. Data collection now is absolutely critical to understanding new patterns and behaviours.
So, while PropTech will definitely deliver some exceptional enhancements to the practical way the property sector builds, funds and generally does business, the most important benefit of the greater adoption of PropTech as a result of Covid-19 is likely to be the change it catalyses in the way the sector and its participants think.
As with any technological advance, it’s not the technology itself that is valuable, it’s the opportunities that technology creates. These opportunities have never been more ripe for the picking, and the combination of Covid-19 and a much more digitally-focused world has provided the impetus for the long overdue reinvention of the sector to put technology-driven, opportunity-based thinking and strategising at the core of how property in Africa works.
Genevieve Naidoo is Divisional Executive: Property Finance PM & Valuations, Nedbank CIB