COVID-19 continues to weigh on Growthpoint
Growthpoint’s distribution per share, for the six months ended December, has slumped 44.8 per cent year-on-year. This is with Covid-19 severely impacting the commercial property space. During the half-year, Growthpoint’s South African portfolio achieved a 97 per cent average rental collection rate. Growthpoint CEO, Norbert Sasse joins CNBC Africa for more.
Wed, 10 Mar 2021 16:16:23 GMT
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AI Generated Summary
- Challenges faced by Growthpoint due to the significant impact of COVID-19 on its operations and financial performance
- Shift towards remote work and reorganization of workplaces affecting occupancy rates and lease negotiations in the commercial property sector
- Uncertainties and changing dynamics in the rental market due to the ongoing pandemic and market-driven repricing
The COVID-19 pandemic continues to have a significant impact on Growthpoint, as the commercial property sector navigates through a challenging period. Growthpoint's distribution per share for the six months ended December has plummeted by 44.8 per cent year-on-year, reflecting the severe consequences of the global health crisis on the company's operations. In an exclusive interview with CNBC Africa, Growthpoint CEO, Norbert Sasse, shed light on the challenges faced by the company and the broader industry.
Sasse highlighted the financial toll that COVID-19 has taken on Growthpoint, with over 540 million Rand in rent reductions, deferments, bad debts, errors, and provisions recorded in the previous six-month period. The impact persisted in the following six months, with an additional 161 million Rand in COVID-19 related costs and expenses impacting the company's financial performance. South Africa's retail, office, and industrial portfolios have all been significantly affected, with the V&A waterfront numbers showing a sharp decline due to restrictions on international travel and tourism.
Internationally, Growthpoint's investments in the UK, Eastern Europe, and Australia have faced varying degrees of pressure, with the UK retail sector bearing the brunt of the challenges. Despite the relief measures provided by the company, Sasse expressed concerns that the sector may not have hit rock bottom yet, with uncertainties surrounding a potential third wave and the slow progress of vaccination efforts in South Africa.
The shift towards remote work and the reorganization of workplaces have also presented new challenges for Growthpoint and other companies in the industry. Sasse acknowledged the mixed responses from businesses, with some opting for a hybrid work model that allows for flexibility in office attendance. While remote work has proven viable for many, the need for face-to-face collaboration and a balanced approach to digital and physical workspaces remain crucial.
Occupancy rates for Growthpoint currently stand at around 90 percent, with the office sector in South Africa experiencing a record-high vacancy factor of 18 percent. Negotiations with clients for lease renewals have become more complex, with downward pressure on rentals and negative reversions across office and retail sectors. The inflation outlook for rental escalations has also shifted, with shorter lease terms and a trend towards market-driven repricing affecting the sector's dynamics.
As the commercial property sector continues to grapple with the repercussions of the ongoing pandemic, Growthpoint and industry players are adapting their strategies to navigate through uncertain times. The need for agility, resilience, and innovative approaches to property management and tenant relationships remain paramount in the current landscape.