2022 is the year of the Experience Economy for Commercial Property

I am a monthly contributor to Asset Mag and for the April issue, I wanted to talk about the importance of the Experience Economy and how it will affect the commercial property industry in South Africa. 

2022 is the year where our customers find that word-of-mouth referrals are golden, they only want to support companies that authentically care about them and the surroundings in which they operate and they only purchase something after they have read enough satisfactory and credible reviews on it. 

With the consumer more educated than ever before in history and with more access to resources online, by the time a customer makes a purchase decision, they have explored all options and are meticulously informed. 

The Experience Economy has arrived in the Commercial Property Sector

For the commercial property industry, 2022 is the year where there will be a strong focus on the customer experience rather than the buildings themselves. Tenants are wanting to build strong, nurturing relationships from their first interaction with their Landlord and right throughout their leasing journey. 

This year, Landlords will focus on retaining tenants, leasing and re-investing into vacant space with a strong focus on their current office space vacancies in order to persuade tenants to lease office space. As an industry, we all need to work together to recover businesses while re-inventing Tenant relationships in each sector; office, retail and industrial. 

Office

While Landlords desperately brainstorm to re-invent their current vacant office portfolio’s, there are only so many suitable sites that will qualify for an office to residential block conversion. Converting office blocks to industrial properties will be difficult as many office blocks are cramped in CBD’s and will not provide enough vacant surrounding land for yard and truck access. Funnily enough, price wouldn’t be the problem when it comes to an office block to industrial conversation because currently there are warehouses in South Africa that are similar in price per m2 when compared with certain lower grade office blocks - yet the replacement cost for building office blocks is double. 

As long as Landlords can keep the following in mind when re-imagining their office spaces, I believe the Tenants will come. There is always a place for a physical work space of some sort – it is your second home. It can be a place for co-workers to check-in to perform creative activities and connect as a team. We are human beings and we enjoy connecting in person, that will never change. Therefore, Landlords should look to create an “experiential” style office space. Invest in improving your current amenities and implementing new ones. 

Also important to note is the Tenant’s non-negotiable need for flexibility in an uncertain market. The strongest of Tenant’s are looking to lease for one year or on a month-to-month. There is room for Landlords to create joint-venture style partnerships with their Tenants and dedicate space in your portfolio to flexible leasing. In these packages you can cancel tenant installation allowance and beneficial occupation options to avoid upfront investment as you have no long-term lease security. Perhaps you can include the broker who brought you the Tenant into the joint-venture so that instead of paying a huge sum of commission upfront, you pay them a percentage of the lease each month that the Tenant continues to stay with you. The current broker commission tariff needs to be re-looked at in today’s uncertain and flexible market anyway, however, I will save that for another article.

Retail

Brick-and-Mortar Retail stores were transforming multiple years prior to the pandemic with many converting their current store fit-outs in order to create an unplayable in-store experience that you cannot achieve via E-commerce stores. The experience was put first and the purchase later. For instance, in 2016 Nike created a basketball court in their 5-storey New York store in order for customers to test out and experience their sneakers. E-commerce and an omnichannel presence online are supposed to compliment the experiential in-store experience. YuppieChef did exactly this when they went from a world class online store, to physical experiential stores. 

Before the pandemic, South Africa had an oversupply of shopping centres and offices. While the demand towards community centres has increased post lock downs, South Africans still love the family experience of shop, eat and play in a shopping centre. Retail is not dead for South Africa, we have been behind on the Retail Revolution regardless of the pandemic. Landlords should work with Tenants to make better use of their current outdoor areas and incorporate courier services into mall activities to marry the E-commerce experience with physical shopping experiences.

Industrial

Industrial is the start of any supply chain and this growing, resilient sector has led to increased demand and stock shortages globally. I would say that the biggest challenge that Landlords have in this space is to keep up with new technologies in order improve supply chain issues and to research customer data properly in order to keep up with demand. There isn’t much data available for industrial Landlords to make use of in order to keep up with the fast pace of this sector. 

At Ask Ash, we get dozens of enquiries from Landlords who are looking to purchase fully-let industrial parks at a decent yield. The problem is, there aren’t many for sale and very little prime land for sale where Landlords can build. 

Time to invest into Tech

A few years back, I used to cringe at how often everyone was over-using the term “Digital Disruption” and how it was going to affect their industry. It’s hardly a disruption, rather a new way of life. The pandemic forced all industries to embrace tech and virtual working in order to keep their businesses operating. Now, as we slowly but surely come back into the office, retail and industrial space, we need to bring that tech with us. As an example, during the pandemic, brokers and agents were home-bound and introduced virtual viewings to their customers. According to a VTS survey, 80% of Tenants still continue to prefer virtual tours of space in order to short list their favourite spaces before viewing the sites in person. Tenants still like to see and touch the space they decide to lease or buy, however, it is clear that virtual tours are becoming a pre-requisite before the physical site tour takes place. Virtual Tours allow the customer to speedily and conveniently go through their process of elimination. 

Tenant based software to improve the Tenant experience, leasing management software, data and reporting software, improved marketing software and automated systems will increase productivity of staff and production levels. According to the African Tech Startups Funding Report, investment into African tech startups hit record-breaking levels in 2021 when for the first time in history, funding for over 500 tech startups surpassed $2 billion. Technology investments are evidently on the rise and as a Landlord you should be investing into tech so that your customer’s digital experience goes hand in hand with your physical experience. 

An Agile Attitude

The pandemic has taught us one thing and that is we need to become comfortable with uncertainty and fall in love with the customer’s need for flexibility. This is not a hard task for South Africans considering we work in some of the most uncertain conditions in the world. We experience load shedding, poor infrastructure, lack of service delivery, a shrinking economy, high petrol prices, government corruption, the list goes on. If you can run a business here, you truly can operate a business anywhere. In a market like ours, there are always opportunities. I am a proud #ImStaying South African, therefore, it’s not a matter of letting our macro-economic issues define us, rather innovatively changing our business practices to redefine them. 

Need some commercial property advice? Pop me a direct message on LinkedIn!

I usually respond within a few hours and look forward to making strong, lasting connections. I can’t wait to work with you.

📧 ash@askash.co.za

💻 www.askash.co.za

About Ash

Ash Meyers, Commercial Property Broker at Ask Ash, is an educator when it comes to the commercial property landscape in South Africa. She has almost 10 years of experience in commercial property leasing and works with over 250 listed and private commercial property landlords nationwide. You will be enchanted by Ash’s personalised level of customer service, speedy communication, efficiency and her ability to construct favourable property deals.