ENERGY EFFICIENCY AND ESG THE PRIMARY DRIVERS OF BUILDING IN SA

The most discussed topic in corporate real estate (CRE) circles in South Africa over the past year is, without doubt, energy (of which the biggest user is HVAC&R) and water stability

ESG ranked only fifth globally and in the Asia Pacific region, and did not make the top five priorities in the Americas, it is an area of critical focus in Africa

Globally, ESG is regarded as the ‘right thing to do’ and has gained more prominence in recent years in driving real estate priorities

The most discussed topic in corporate real estate (CRE) circles in South Africa over the past year is, without doubt, energy (of which the biggest user is HVAC&R) and water stability.

“The most discussed topic in CRE circles in South Africa over the past year is, without doubt, energy and water stability,” Natasha Bruwer, who is Managing Director of Occupier Services at Cushman & Wakefield | BROLL and Chair of CoreNet Global Sub-Saharan Africa Networking Group, says. Although ESG ranked only fifth globally and in the Asia Pacific region, and did not make the top five priorities in the Americas, it is an area of critical focus in Africa. “Globally, ESG is regarded as the ‘right thing to do’ and has gained more prominence in recent years in driving real estate priorities,” she says.

She adds that in South Africa, ESG is becoming something of a ‘license to operate’ as businesses are accelerating plans to develop sustainable renewable energy and water sources in response to climate change and to ease the load on failing infrastructure. In the same way, social governance (diversity, equity and inclusion) has been accelerated through legislation and policy to reverse the structural discrimination of the past.

“Necessity is indeed the mother of invention and is creating authenticity around the adoption of ESG goals and driving implementation strategies in South Africa,” she concludes.

Cost, talent and operational excellence are currently the top three drivers of strategic (CRE) decisions globally. This is according to the 2023 What Occupiers Want annual survey compiled by Cushman & Wakefield in partnership with CoreNet Global. In South Africa, however, environmental social and governance (ESG) priorities rank third, after cost and talent, according to Bruwer.

The survey examines trends in office location and workplace, perspectives on changes to portfolios, and strategies around policies, procedures and decision-making worldwide.

Key findings

While the key drivers of CRE strategy remained the same, their order of importance has changed. Globally, cost pressure is now the primary challenge for companies, followed by talent sourcing and retention, and operational excellence. Customer relations and ESG ranked fourth and fifth, respectively. Significantly, ESG moved up from eighth position last year, showing an increase in social and sustainability conscious goals.

Communal office space has increased in importance, with the focus being on the office as a place for collaboration and innovation, but nearly two-thirds of occupiers (63%) plan to reduce their real estate footprint in the next two years. More companies are now recruiting talent outside their own cities, with 26% recruiting from anywhere in the world. Flexible work remains important, with employees preferring a degree of autonomy and choice.

The top three drivers of CRE decisions in the Europe, Middle East and Africa (EMEA) region – into which South Africa falls – were slightly different, with cost and talent ranking first and second, but ESG coming in third.

Bruwer confirms that the key drivers of CRE strategy in South Africa align closely with the EMEA region feedback. “Although the research does not indicate the sample size from Africa, each country will likely show varying combinations of these top three drivers, depending on the macro-economic climate and unique challenges facing occupiers in those markets,” she says.

Cost pressures

In South Africa in particular, she says the enormous cost pressures of rising inflation and climbing interest rates have been compounded by socio-political unrest events and increased load-shedding. These factors have severely affected large corporations doing business in South Africa, driving a strong focus on cost containment. “Corporate real estate teams have had a firm seat at the C-Suite table since COVID-19 because property is an important variable in reducing costs and generating income,” she says.

Alexforbes, at a recent CoreNet Global SSANG event, revealed that adopting a flexible working model was a sustainable solution to reducing its footprint across 13 South African offices without closing them. In the process, it has reduced its floor space by over 60% and unlocked R1.2bn in value from downsizing.

“Property costs rank second only to salaries as the largest expenses for companies, and well-executed real estate strategies can achieve material savings. Unlocking maximum efficiencies requires that a combination of policy, change management, design and technology be incorporated into a strategic plan. Hybrid working policies need to be implemented that govern expectations and output. The key to the success of a hybrid working environment is the technology that powers the invisible structure between the physical occupation of space and that of the virtual,” she adds.