As the pandemic stretched to a global phenomenon two years ago, its impact was felt throughout the world, and the real estate market in South Africa was no exception. Though the trend of converting empty office buildings into residential spaces in South Africa had existed before the onset of the COVID-19 virus, as lockdowns forced offices to close, that trend has significantly accelerated.
The uptick in residential conversions could not have come at a more opportune time, not just because of the rise in remote work, but because of a backlog in social housing. The South African government has jumped on the public-private conversion bandwagon by offering grant-based funding of as much as 70 percent for qualifying social housing projects, as per newly outlined service-level agreements between developers and social housing agencies. Plus, South African banks have followed suit with similar measures. Though residential conversions hadn’t seemed like much of a solid investment in the past, many banks are now willing to provide additional funding for like projects.
In South Africa, the prices for vacant office buildings are lower than they have ever been, so the costs of converting those spaces is significantly less than building a new multi-family unit from the ground up (especially in terms of utilities infrastructure). But other than the enticing cost-savings, these vacant office buildings are geographically favorable, as they are right in the heart of high-density urban areas within walking distance of public transport.
While office-to-residential conversions are taking off in the region, the longevity of the trend has been called into question. As companies clamor to reopen, some of these vacant buildings may be clawed back for office use. It seems that the endurance of the conversion trend hinges on how permanent hybrid work schedules turn out to be. If the future of work truly involves less time in the office, then more companies will rely on co-working and flex offices, reducing the demand for office space from pre-pandemic levels. Yet if the hybrid work model turns out to be nothing more than a temporary carrot and companies revert back to the traditional 5-day workweek in the office, this opportunity for desperately-needed affordable housing may be short-lived.