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Property sector faces reboot in Covid-19 rebound

By Peter Theuri | June 25th 2020

Developers will need to rethink their office spaces in post-Covid world. [File, Standard]

The silence in many prime commercial buildings in the city was deafening even before the Covid-19 pandemic, with potential tenants put off by the high rents that Grade A offices attract. 

The pandemic struck the final nail in the coffin, or so it seemed, with more commercial spaces going empty.

Architectural Association of Kenya (AAK) President Mugure Njendu says the Covid-19 pandemic should be a point of reflection on how architects, and the country at large, shape the future.

“It is a good time for all to reevaluate their business models and look for innovative ways to make new income,” she told Home & Away.

“One immediate way architects should be involved in is redesign of offices, restaurants and other spaces in a Covid-19 world. Additionally, we should re-look our urban spaces and how we move in them. This is the time to redesign cities to be walkable and bike friendly.”

Ms Njendu says history has shown that great disruptions usually lead to economic revolutions.

“In Kenya it’s the right time to re-energise the manufacturing industry and also to increase capacity and improve our healthcare facilities. Architects have a role to play in this revolution,” she says. 

This view is supported by others in the industry.

“People are now working from home. There are no setups for offices at home. Perhaps it is time for us to think about coming up with residentials with office spaces,” says an architect, Moses Okemwa.

He says ongoing projects are sure to be completed, but anything new after that remains a hugely optimistic speculation.

But as landlords and tenants seek to survive amid the scourge, they might be forced to reach a truce.

Rental concessions

Abraham Samoei, president of the Institution of Surveyors of Kenya, says new clients might enjoy rental concessions. These are compromises that landlords make to the original rent terms in the hope of finding tenants quickly.

“Rent-free agreements could be reached with headline rents to follow. But the landlords have to be careful not to disrupt other contracts, because such agreements could (lead to) older tenants asking for discounts, which the landlords may not afford,” says Mr Samoei.

Headline rent is one that is paid under a lease after the end of any rent-free or reduced rent periods.

For the architectural world, the situation has been bleak since the outbreak. The discouragement of coming up with breathtaking buildings that no one can immediately occupy is sure to slow down activity as investors seek to avoid the risk, at least for the near future.

How markets react might determine whether the creative designs that have lately adorned the city skies will slow down.

Built Environment professionals in a recent AAK survey indicated that about 30 per cent of construction sites were closed immediately and 63 per cent slowed down after the first announcement of a Covid-19 case in Kenya.

They also expected their revenues to be affected by between 50 per cent and 75 per cent.

A total of 87.5 per cent indicated that they had experienced significant decrease in client enquiries for new projects, while another 70.11 per cent reported a decrease in communication or follow-up on ongoing leads.

But this is a window of opportunity for architects to come up with creative innovations that will mitigate the disruptions that have been caused by Covid-19, says an industry chief.

Stalled projects

Even then, only 7.18 per cent of the respondents in the AAK study indicated that the ongoing projects have remained on course, with 29.83 per cent of the total respondents reporting that several of their projects had since stalled.

Over 60 per cent of the respondents noted a slowdown in progress of the active projects.

Property markets have not experienced any significant changes in prices, says Samoei, owing to the slow nature of reaction in the sector.

However, the effects will soon be felt as the real shocks of the pandemic on people’s economic status kick in.

Physical interaction

The valuer says office spaces will still be in demand as many companies will not manage to implement digital working systems to enable employees work from home.

“The need for a physical office cannot be overemphasised. Companies will still need to work from spaces where customers can visit and have a physical interaction with the office,” he says.

“As much as we can expect that demand will absolutely decline, there will still be uptake of offices even in prime places. As companies lay down infrastructure to ensure work-from-home routine is fully operational and effective, employees will continue to work from the office, albeit in shifts.”

Covid-19 has hurt many companies, some being forced out of business as the disease took a toll on the supply chains, decimating fortunes of even some of the most solid organisations.

The travel and hospitality sectors have incurred such a heavy blow that government bailouts seem the only way out of the abyss.

Rental office spaces in the city can still be filled, Mr Okemwa says, if the government support small and medium enterprises, which are the main occupants.

He says even the Grade A offices in the posh suburbs of the city would easily attract clients.

Covid 19 Time Series


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