<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
SIMON BROWN: I am chatting with Keillen Ndlovu, an independent property analyst. Keillen, I always appreciate the time. Water is perhaps our new crisis. Dams are full, but the pipes are leaking. Property owners have water as a new challenge. In many ways it\u2019s going to be harder perhaps than the Eskom electricity challenge, but it is a real and present danger for landlords.<\/p>\n
KEILLEN NDLOVU: Yes, it\u2019s been tough, but landlords are trying hard to adapt, given these challenges. As you mentioned, power was the main issue, it overshadowed the water challenges, but now there\u2019s more focus on water.<\/p>\n
As I speak, in my area we haven\u2019t had water for two days, and all of my colleagues have had to be sent back home as there is no water in the office because of a pipe burst as well.<\/p>\n
Read:
Sapoa at 60: Championing commercial property and protecting SA\u2019s future
Drained funds, dry taps: The 20-year water project failure
An action plan to end the water crisis once and for all<\/p>\n
SIMON BROWN: That\u2019s just it. When the power goes I can carry on my laptop. When the water goes \u2013 I remember when I was at Standard Bank we all just got sent home. The entire Simmonds [Street] and Waterfall City, lost water what, 25\u00a0Jan to 5\u00a0Feb. But Attacq, the landlord there, their tenants weren\u2019t affected. They\u2019ve basically built capacity for that centre.<\/p>\n
KEILLEN NDLOVU: Yes, it\u2019s amazing what they have done. Looking at their portfolio, they\u2019ve built over 80% of their portfolio. It has five-plus days of backup water. So it was quite beneficial, given that time that hotels were operating; offices operated as well as shopping centres.<\/p>\n
SIMON BROWN: What does it cost for something like that? It can\u2019t be cheap. That must be a huge cost for Attacq.<\/p>\n
KEILLEN NDLOVU: Yes, it is. It is for all the landlords as well. I guess you have to invest in different kinds of cost structures, but you have to invest in JoJo tanks or Roto tanks.<\/p>\n
Look at Attacq\u2019s portfolio, which is even more advanced.<\/p>\n
They have sectional steel water tanks that need pumps as well to pump the water \u2013 and you\u2019re doing that on your own.<\/p>\n
It\u2019s not getting any rebates from the City Council, even if rates and taxes are rising.<\/p>\n
Read: Attacq\u2019s 1.3m-litre backup buffers impact of Joburg water crisis<\/p>\n
SIMON BROWN: And it is just the case. I mean, the person wandering through the mall is unaware of the benefit.<\/p>\n
But landlords are taking different routes. For example, Vukile is getting almost a quarter from boreholes, Growthpoint going with boreholes, Fortress doing low water. There are a lot of different ways where they can try to tackle the challenge.<\/p>\n
KEILLEN NDLOVU: Yes, that\u2019s right. So it\u2019s basically rainwater harvesting as well. They get water coming from their rainfall, as well as groundwater, as mentioned, in our boreholes. So landlords are being more efficient and smarter. Not only that, but they\u2019re also investing in systems where you can detect leaks quite early, and some of the systems where you use much less water.<\/p>\n
So that is helping to make our buildings greener, despite the challenge that we face.<\/p>\n
Read:
Growthpoint taps desalination to ensure V&A water supply
V&A Waterfront to commission R184m desalination plant early 2024<\/p>\n
SIMON BROWN: That\u2019s just it. This is not a passing fad. If you think back to Eskom, we started with the solar panels because we needed the power. Then it becomes like hang on, this is actually green, this is actually in many ways cheaper.<\/p>\n
In South Africa, it\u2019s not infrastructure; we\u2019re also a drought country. This actually becomes operationally important.<\/p>\n
KEILLEN NDLOVU: Yes, that\u2019s right, that\u2019s right. Look at the Western Cape, for example. It\u2019s a region performing well, but prone to droughts. You\u2019ve seen Hyprop. Even though the Western Cape has lower water losses or leakages, Hyprop is looking to invest in backup water for three to five days in their Western Cape portfolio \u2013 which is probably more in line with what landlords are doing in Gauteng and other provinces, where they\u2019re aiming for at least a minimum two-day backup water supply to as much as five days with Attacq, as I mentioned.<\/p>\n
SIMON BROWN: It\u2019s office, it\u2019s also going to be retail. Is it as important with logistics? Or perhaps with logistics it\u2019s maybe a smaller scale, perhaps, that\u2019s needed?<\/p>\n
KEILLEN NDLOVU: For logistics probably less so. Storage another sector as well, depending on the tenant, but some tenants will have their own backup water facilities, and backup power as well as part of their operations.<\/p>\n
But where it counts most is that where you have got foot traffic, you\u2019ve got employees in the buildings as well \u2013 and places like your government offices, licensing departments.<\/p>\n
Read:
Solving for water insecurity, one Damsak at a time
Why water resilience is part of our new reality
Joburg Water disaster has been a decade in the making
Businesses adjacent to state dams may become \u2018illegal\u2019<\/p>\n
Talking about that, you find that if the system is down or there\u2019s no water, that delays things. That\u2019s where you want water when you\u2019re providing services to people; they need to have coffee, they need to have water, and use of the bathrooms as well. If there\u2019s no water they have to close down the bathrooms.<\/p>\n
SIMON BROWN: Yes, that\u2019s it. It\u2019s a health issue. When I lose power at home, it\u2019s an inconvenience. When I lose water at home, it\u2019s way more than just that. Some are different.<\/p>\n
Fairvest, which is very much rural and township retail landlord, now produces around 15% of its of its own water. Are tenants in smaller towns, perhaps, even more exposed because of smaller municipalities and more risks of failure in those municipalities?<\/p>\n
KEILLEN NDLOVU: Yes, that\u2019s a trend that\u2019s picking up. What you\u2019re seeing is that with most of the landlords using grey water \u2013 and now we\u2019re hearing talks of water recycling as well \u2013 you have to recycle your own water in order to keep your malls and operations open. So that\u2019s the trend that we\u2019re seeing in the sector, especially water recycling.<\/p>\n
SIMON BROWN: That\u2019s a great point. You alluded to it a moment ago. We mentioned Fortress \u2013 it\u2019s low-water toilets. I know we\u2019ve got them at the mall next to me here in Rosebank as well. That saves.<\/p>\n
There are different ways they can do it. It can be boreholes, it can be recycling, it can be low-water toilets, it can be JoJo tanks. There are many different ways that a landlord can tackle the challenge.<\/p>\n
Read:
SA tightens grip on borehole use
Boreholes are booming in a drying South Africa
Toilet water to tap water: The shift to recycled wastewater in SA
Cape Town water recycling project \u2018should not be privatised\u2019<\/p>\n
KEILLEN NDLOVU: Yes, that\u2019s right, that\u2019s right. But remember also it depends \u2013 you just need the water to come through at some point.<\/p>\n
There was an interesting step done by Zodidi Meyiswa from Salga, which is if you look at the amount of water losses across most municipalities, almost half of the purified water gets lost through the system through leakages, water-pipe bursts, theft, as well as non-payment. That\u2019s revenue to help fix these problems that is supposed to go to the municipalities and is being lost.<\/p>\n
SIMON BROWN: And Simon, you\u2019ve mentioned already the Western Cape, Hyprop and Spear \u2013 which is exclusively in the Western Cape \u2013 are still spending on supply, and there one would imagine that the infrastructure is probably in a better state. But there as mentioned, it\u2019s the drought that\u2019s the challenge, and also just being proactive.<\/p>\n
KEILLEN NDLOVU: Yes, that\u2019s right. If you look at water losses, the Western Cape has got the least amount; they lose about 27% of the water. And then you\u2019ve got provinces like the Free State, where almost 61% of the water gets lost.<\/p>\n
So the Western Cape still does well, but people are still investing in backup water \u2013 not just because of these water losses, but for drought and other unexpected events.<\/p>\n
Read:
Durban and Joburg worst hit by water outages
Why do Joburg\u2019s taps keep running dry?
Government seeks private capital to tackle water crisis
Joburg is losing R10bn a year to water leaks and crumbling infrastructure<\/p>\n
SIMON BROWN: Who ultimately pays for this? Is this going to be higher operating costs? Does it go through to tenants? Does it maybe lower distributions for Reit investors?<\/p>\n
KEILLEN NDLOVU: Mostly the landlord will pay for it, and then they\u2019ll pass some of that on to the tenant. If you don\u2019t do that, you may lose out on tenants because of your marketing. Before now you\u2019d say, \u2018I\u2019ve got backup power\u2019, and now you say, \u2018I\u2019ve got backup power and I\u2019ve got backup water as well\u2019. So that\u2019s how you bring in tenants relative to your competitors.<\/p>\n
SIMON BROWN: So it becomes a sales point to say, \u2018I\u2019ve got backup, I\u2019ve got backup water\u2019. It becomes more important.<\/p>\n
Interestingly, this money is being spent, and for you and I and the listener, it\u2019s big numbers.<\/p>\n
But then I look at distributions that have been coming through from the Reit sector generally over the last year. We are seeing strong distributions.<\/p>\n
The sector is in a healthy space. You cover it, you look at it, you have been doing this for what, a decade or more, two decades? I didn\u2019t want to quite give your age away, Keillen.<\/p>\n
KEILLEN NDLOVU: [Chuckles] Okay.<\/p>\n
SIMON BROWN: But the sector\u2019s looking strongly.<\/p>\n
KEILLEN NDLOVU: Yes, it is. There are a number of factors. One, they\u2019ve been able to raise \u2013the equity market has been strong, as well as the debt capital markets; they\u2019ve been able to raise cheaper debt.<\/p>\n
It helps in an environment where rates have been going up, and we\u2019ve seen in the office market as well vacancies coming down. It helps to boost the sector. Retail is probably now starting to slow down, but there has actually been a good performance from most of the shopping centres.<\/p>\n
Read:
After load shedding, water preparedness is the next frontier for homeowners
Joburg wants households to pay 66% more to receive water
Joburg mom faces bankruptcy over R2.9m water bill<\/p>\n
And the listed sector owns some of the premium shopping centres, so they\u2019re able to command better rents.<\/p>\n
And then the industrial sector, which is mainly logistics, has done quite well. Vacancies are less than 2% in the industrial sector, for example. So there are a number of factors helping that, despite the challenges and a slower economy. If you look at the growth, it\u2019s 6-7% for the sector in this environment.<\/p>\n
SIMON BROWN: Yes, it\u2019s been great for investors for a couple of years.<\/p>\n
We\u2019ll leave it there. Keillen Ndlovu, independent property analyst, always appreciate the time.<\/p>\n
#Water #scarcity #commercial #landlords #evolving #strategies<\/p>\n","protected":false},"excerpt":{"rendered":"
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