The post-pandemic commercial development trends in hospitality property

According to  Cobus Odendaal, CEO of Lew Geffen Sotheby's International Realty in Johannesburg and Randburg: "In most industries, the future of work looks likely to involve a combination of in-office and work from home (WFH) and this is driving the growth of flexible and alternative space.

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Odendaal says, the office layout is changing as the need for office stations for all employees recedes and the need for meeting and collaboration spaces increases and the repurposing existing office space and updating building layouts are now a focus point for many real estate companies and investors.

"In general terms, the focus on flexibility will be even stronger for new constructions and one of the sectors that already has a head start on this trend is the hotel industry where the aparthotel concept is currently one of the most exciting and fastest growing segments of this market.

"Globally, we are seeing new brands being launched and established operators converting their products and business models from traditional hotels to serviced apartments, often with onsite amenities".

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Odendaal attributes this to a number of key reasons: "We're seeing far more global workforce mobility, due in part to greater connectivity but also the spike in remote and flexitime working since the pandemic and, in South Africa, semigration is also a driver.

"Many families have relocated to the coast whilst the breadwinner continues to work for a Johannesburg-based company, traveling regularly to attend meetings or, very often, for the whole week, returning home on weekends.

"Additionally, a new trend. Bleisure is booming too, and it's estimated that 66% of travellers work while on holiday, so more trips mix business travel with leisure activities.

"And it's simply not practical or convenient to stay in hotels on an ongoing basis as most people want to be able to at least prepare basic meals and also to not be confined to just one small room."

The growth of these trends is borne out by statistics in a 2020 report by The Apartment Service Worldwide which found that growth in extended-stay and serviced-apartment accommodation is accelerating, with a 24% increase in capacity between 2018 and 2020 compared to 10.5% growth in the preceding two-year period.

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It's further corroborated by recent research from commercial property consultancy Lambert Smith Hampton (LSH) which says that serviced apartments and aparthotels are the fastest growing segment of the UK's hospitality market.

"And when one considers that The Global Business Travel Association (GBTA) predicts that the global business travel industry will be worth US$1.7 trillion by the end of this year, compared to $1.3 trillion in 2017, this is the sector that's attracting much attention from the smart money."

Odendaal says that the key problem for future developments in major metros is the dearth of available land or suitable sites, especially in prime areas.

"In Johannesburg, the main commercial hubs like in areas Melrose, Rosebank and Hyde Park are already fully developed and developers are now repurposing older buildings in order to meet the shifting demands.

"Which is why we're thrilled to be marketing a very rare development opportunity that not only offers considerable development scope but is also situated in one of the city's premier destinations."

"Summer Place, an iconic landmark destination in the heart of Hyde Park, has been operated as a world-class banqueting and conferencing centre since 1994 and now, after almost three decades, property developers in the hospitality space have a chance to acquire almost 40 000m² of prime real estate.

"This property ticks all the new hospitality trend boxes as zoning rights allow for multiple related uses, including residential buildings, conference facilities, ballroom facilities, a dining area, restaurants, a hairdresser, gym and other ancillary uses associated with a hotel."

Odendaal adds that the location is ideally situated for business and leisure travellers as everything they could possibly need is right on their doorstep and the nearby Gautrain stop offers easy access to the other main Johannesburg commercial hubs as well as Midrand and Pretoria.

"Real estate continues to be one of the surest investments during tough economic times and globally we've seen development bounce back quickly from the pandemic disruption, however there have been significant market shifts and new consumer needs which have to be met.

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"Internationally, hotel REITs (real estate investment trusts) have proven to be a popular way to own and invest in hospitality assets and the 14 largest US hotel REITs have a combined value of around $55 billion,

"And although several of the larger REITs currently have only limited exposure to the extended stay and serviced apartment sector, this is expected to increase significantly over the next year or two as there have already been three major mergers, all of which have formed powerhouses with significant extended stay interests," says Odendaal.