3 CFOs unpack the challenges and opportunities the property industry faces
Raj Nana, Anabel Vieira and Ntobeko Nyawo have had to navigate significant changes in the property industry.
The real estate market is changing fast on the heels of Covid-19 induced changes. President Cyril Ramaphosa recently announced the commencement of the Property Practitioners Act (PPA) from 1 February 2022, with the Act expected to bring even more changes to the sector.
Faced with all these changes, we caught up with three CFOs who have had to navigate the recent challenges in the property industry, as well as the opportunities that came with it.
Navigating the challenges
The property industry has undergone significant challenges since Covid-19 came to South Africa. Many businesses were unable to survive the economic impact of the pandemic and had to close shop, leaving many properties unoccupied.
As a result, property companies across the country were looking at reduced income from rentals.
Octodec FD Anabel Vieira acknowledges that the industry is going through a challenging time. “There was already a climate of low economic growth and the recession just before the pandemic hit us. So these have been tough times for businesses, and most are focused on protecting their business instead of growing it.”
She says that property used to be an attractive industry because it was reliably stable, continuously growing, but even that has changed: “The economy has become very tough, so you need to make big decisions and act on them quickly.” However, she says that on the flip side, these shifts are forcing industry leaders out of their comfort zones and signalling that they need to explore new ways of doing business.
CFO Raj Nana (pictured) explains that Attacq’s top priority through the pandemic has been the health and safety of all its staff and other stakeholders, including tenants and shoppers across the country. Stakeholders were anxious with the uncertainty brought on by the virus and the lockdown, and as an executive team, they proactively updated them regularly on what operating realities were on the ground.
“Early on during the hard lockdown, we had to come to an understanding of the new regulations and their implications for our operations. We had to ensure that we were compliant but also create a safe environment for our tenants and shoppers,” Raj says. “We spent a lot of time with our clients to understand the impact of the lockdown on their businesses and worked with them to find solutions. The rental relief we provided as support impacted our results, but we took a long term view on the sustainability of our tenants.”
For Redefine Properties CFO Ntobeko Nyawo it’s important to be in a business that is able to innovate and disrupt. “When it comes to innovation, it’s about doing things better and being efficient. For me disruption is about the ability to anticipate and see where the market is going so you can serve your clients better and play in new markets. This speaks to the ability to adapt to service clients and capture dislocation in those markets.”
His personal ethos when solving problems is falling in love with them. “By embracing the challenge, seeing the bigger picture and having the ability to articulate the problem, you can think differently about the situation and connect the dots.”
Embracing new opportunities
Anabel is optimistic that there are opportunities to be unearthed. However, she says that most businesses are looking to sustain themselves rather than take risks, so there is still an air of caution.
“For us, the new opportunities we see are in trying to change the product that we offer. We don’t operate in a business where you can quickly sell off your assets at the drop of a hat or make rapid changes. You have to look at reinventing your product offering and trying to enhance it. We also have to look at the market and respond and adjust to what it’s telling us,” she says.
Raj observes that trends such as click and collect and online retail have been accelerating through Covid-19, acting as a catalyst for retailers to offer online channels and to service their shoppers differently.
Anabel points to newly accepted ways of working and how the move to hybrid work has shifted the demand for property. “Office space tenants have different needs now, depending on whether they are big corporations or SMMEs. We are looking at converting offices into more full-service offerings and enhancing them as user-friendly places for people to meet. We are also rethinking the facilities as locations for people to access services they may not have at home, such as stable wi-fi, quiet spaces, and meeting rooms to congregate. We don’t yet know what the demand will be, but we will test that market to gain a better understanding as time goes.”
The company is also looking at trends in the residential market. Anabel says that it’s clear that working from home or flexible working is here to stay, and the company is diving deeper into how to tailor its offerings in that fast-evolving space.
Raj also notes that: “From an office workplace perspective, we saw some trends emerging prior to Covid-19 with flexible and co-working spaces gaining traction. I personally believe that a hybrid model, as opposed to a pure work-from-home model, is a better solution for businesses. We forget how important it is for most businesses that colleagues collaborate with each other. Virtual meetings can only take you so far, but creativity stems from positive energy, and that comes from physical interactions, which can be done responsibly by taking the right precautions. Currently a number of large employers have different views on the future working arrangements; we continue to stay close to our clients and monitor global trends as well.”
He explains that Attacq is strategically focusing on capital structure and liquidity through the levers that the company has control over, such as delivering on some of the property disposals it has earmarked. “The company is also ensuring that it is allocating capital in the right places as it becomes much scarcer and refinancing the group’s debt to a more balanced maturity profile,” says Raj.