Adapt (Fluid Office Space) - exactly what is needed Post-Covid.
Adapt (Fluid Office Space) - exactly what is needed Post-Covid.
In a challenging business climate, the Asset Management division of Eris Property Group (EPG) has found innovative solutions to keep its property portfolios ahead of the game. After reassessing the available office space within the Momentum Property Fund (MPF) portfolio against current market trends, the EPG Asset Management team strategically repositioned an identified space ― and recently launched flexible office concept called Adapt, with the pilot offering in Sandton. The result is two-fold: reducing office space vacancies and providing private equity opportunities by investing into new ventures.
The Covid-19 pandemic has had an impact on every aspect of our lives, including the property industry. For Eris Property Group, the company continues to remain adaptable to market change - particularly during a global pandemic - finding innovative ways to keep their portfolio financially sound.
With the national office vacancy currently at 14.5% and expecting to grow further, the Eris team, like most landlords, are sourcing alternative uses for their excess office space to reduce vacancies.
But even before this, Eris has performed well, thanks to the team's hands-on approach to asset management. Entrusted with the property asset management of an assortment of funds ―listed funds, large corporate and private property funds ― the aim is always to deliver exceptional results. Sudesh Moodley, Executive Head of Asset Management at Eris Property Group, says that the Asset Management division is tasked with the management of the Momentum Direct Property Portfolio, with total assets under management exceeding R10bn. Over the last 20 years, the fund has achieved an annualised return of 14.5%, which is consistent with the performance of direct and listed property funds in SA (Source: MSCI).
The Direct Property Fund has performed well even during the current pandemic, which is testament to the resilience of direct property as an asset class. Over the last three years the fund has achieved annualised returns of 7.36%, which is favourable when compared to performances of other asset classes (SAPY: -12.91%, equities:4.29% and MSCI Property index: 7%).
According to Moodley, the property sector, pre covid, has had wonderful performances over the last 15 years. Funds that have diversified portfolios have weathered the storms better than those more exposed solely to the office sector. Low economic growth ― and an oversupply in space ― has resulted in the office sector performance tapering off over the last few years, even before the current pandemic.
Even though other asset classes have fared better overall, Covid-19 has expedited the impact of an ailing economy on the property sector. An increase in tenant vacancies and arrears, coupled with rental concessions during lockdown, have all had a negative impact on the entire sector.
Eris's approach to asset management through these difficult times has been to adapt. In an attempt to reduce vacancies in a challenging market, the Momentum Property Fund (MPF) is diversifying into the "tenant" space.
MPF has embarked on different types of opportunities including:
- Medical Suites
- Flexible Offices
- Dark Kitchens
- Solar
Moodley says that these initiatives will not only reduce the vacancies for MPF, but also provide private equity opportunities by allowing the MPF to invest into these new ventures.
When it comes to investment portfolios, flexible office space has seen significant growth globally over the last 12 months ― with double digit growth expected over the next few years. The main reason for this is that flexible spaces are attractive with short term leases and all-in costs provide flexibility to tenants.
The address chosen for the first flexible office space was 3 Gwen Lane, which provides a very competitive offering in the heart of Sandton. Five other office buildings nationally have been identified, which are expected to be operational before the end of July 2021. This would enable Adapt to have a national footprint, providing satellite offices for all Adapt tenants and in time, extending this offering to existing MPF tenants.
The rental for Adapt varies depending on the location and is tailored to suit the specific market where the building is situated. Adapt provides a combination of hot desking and executive office suites with an all-inclusive fixed rental (which is lower than most competitors), without longer lease commitments. These spaces range from 2-person offices to 100 person offices― with varying pricing per property ― without comprising on the service, look or feel. Adapt - a smart choice whether you are looking for flexible office space or an innovative way to keep your portfolio financially sound.
Find more information here: https://adaptwork.co.za/
