South Africans may be forced to work in the office more

Published Jul 10, 2023


If trends in America and within big global companies are anything to go by, South Africans could find themselves dealing with stricter work-from-office policies.

The office property market remains in the “worst position” of the three commercial property types, according to Rode & Associates’ latest State of the South African Property Market report, but this could change if global trends emerge here.

Rode & Associates’ Kobus Lamprecht says the momentum “seems to be shifting towards returning to the office in larger numbers”.

While there is not much local data on how many workers have returned to offices, anecdotal evidence, such as increased traffic in major nodes, suggests an improvement from pandemic levels.

“Locally, the return to offices has also been boosted to some extent by people who would rather work in an office with power than at home where load shedding is more of a problem,” Lamprecht says.

Rode’s research shows that Americans are returning to offices, but occupancy levels remain low. Still, several of the big firms, from tech to law, are pushing workers back to the office and even getting stricter on the management of this, he says.

The report states that:

  • Google employees are expected in physical offices at least three days a week. It plans to crack down on employees who have not been coming into its offices consistently, which includes tracking office badge attendance, confronting workers who do not come in when they are supposed to and including attendance in employees’ performance reviews.
  • Meta informed its office-assigned workforce in June that they must return to the office three days a week from September 2023. The tech giant reportedly told hiring managers to not list positions as remote on job descriptions.
  • Salesforce has employed a different tactic to get more workers to go to the office by introducing a fundraising programme which donated US$10 to a local charity for each day an employee reported to the office between June 12 and June 23. In December, Salesforce chief executive Marc Benioff openly complained that newly hired remote workers are not being productive. He also said new employees were isolated at home without the benefit of an office culture.

The Rode Report states that office occupancy rates of the 10 largest cities in America reached 49,8% in the week ending 28 June. Data from 2,600 buildings and 41,000 businesses in these cities shows that, during the height of the Covid pandemic, office occupancy levels plunged as low as 15%. By late 2022, it steadily rebounded to nearly 50%, but has remained stuck in the 45% to 50% range in the first half of 2023.

Lamprecht says a three-day work week remains the popular hybrid working policy, and although more people have returned to offices, demand for office space is still below pre-Covid levels.

During the second quarter of 2023, South Africa’s office vacancy rate improved after peaking at an all-time high of 16.7% in the second quarter of 2022. The most recent SAPOA Office Vacancy Survey shows that the overall vacancy rate at quarter end was 15.6%, down by 0.2 quarter-on-quarter.

But this improvement is not expected to last.

FNB commercial property economist John Loos says 42.8% of real estate brokers in the office property space state that economic and political uncertainty is the key factor influencing their near-term negative rental activity expectations. Within this category, 22.86% of brokers talk about “staff downscaling, staff sharing office space, and remote work”, more of which is plausible in tough economic times.

“Traditionally, recessionary conditions lead to lower office space demand and rising vacancy rates. This effect could be amplified by the fact that employers can more easily use the remote work option to reduce costly office space, something that was more difficult in bygone years.

“The current economic environment doesn’t appear overly encouraging for the office market, and indeed the brokers reported lower perceived rental market activity in the second quarter compared to the previous quarter, which is an ominous sign for near term office vacancies.”

Loos adds that a lack of supply of newly built office space may have been partly assisting the recent vacancy rate decline. In addition, a portion of older unused office space is being repurposed for residential purposes, reducing the overall supply of available space in some places.

Regarding the potential future of offices, he says there are still “big questions”.

“Greater levels of remote and hybrid working compared to pre-lockdown days appear to be a ‘permanent’ reality. Improved use of desk space through the hoteling of space (away from the old way of reserving a desk for everyone regardless of whether they are using it or not) and hot desking also appears to be a reality. This, too, leads to a reduction of office space requirements for many.”

So, while brokers have pointed to a recent decline in office vacancy rates, a considerable downward revision of many companies’ office space may still be coming. This is because it would appear that many companies have ample surplus desk space at peak attendance times of the week, the peak attendances these days being significantly lower than in the pre-lockdown era.

“We thus believe it likely that a renewed increase in office vacancy rates will take place in the near term.”