Dipula CEO Izak Petersen sees the property sector bouncing back, driven by the rise of convenience centres and the strong recovery of regional shopping centres after the Covid-19 pandemic.
The founder of the property fund, which owns retail centres in urban and township areas as well as industrial properties, says the office sector, which had been struggling, is also showing some signs of recovery as some companies bring employees back to the workplace.
In an interview with Business Day, Petersen highlighted the growing effect of prop-tech in improving operational efficiency for property owners, a trend set to continue. He also noted the rising focus on sustainability, with property owners optimising energy and water use and shifting to cleaner energy sources to cut costs and enhance resilience.
How important is technology adoption in the property sector, and what innovations are shaping the industry’s future?
Technological advancement is inevitable, with some businesses being early adopters and others taking a more cautious approach. However, the focus should not simply be on adopting new technologies but on selecting and integrating the right solution that accompanies specific needs. Upskilling users to effectively use these tools is equally important for maximising their benefits and optimising efficiency.
Are there any specific technologies or digital tools that have had a significant effect on Dipula’s operations?
We have developed and implemented proprietary in-house asset management tools to enhance data analysis, ensuring more informed decision-making. Additionally, we have acquired a process management system that streamlines workflows, reduces execution time, and improves overall quality. These tools also enable us to work remotely from any device, allowing our team to operate efficiently from anywhere.
How has the property sector evolved over the past few years, particularly in the context of changing consumer behaviour and economic shifts?
Lower disposable incomes have driven consumers to prioritise essential goods, seeking more affordable options between retailers and online platforms. The rise of remote work has reduced demand for office space while benefiting retail, particularly convenience centres and online shopping. This shift has also positively affected the logistics sector. Additionally, savings on commuting costs due to increased remote woke have, in some cases, contributed to higher disposable incomes. In the residential market, migration trends supported strong demand along SA’s west coast, while the northern regions have experienced a decline.
How have macroeconomic factors, such as interest rates, inflation, and global economic instability, affected the property sector, especially for smaller players?
Macro factors — including interest rates, inflation, service delivery challenges and [the] political climate — directly influence property values by shaping demand and supply trends. Recently, SA’s physical property sector has been negatively affected by high inflation and interest rates, compounded by the effects of the 2021 riots and the Covid-19 pandemic. In addition, increasing administered costs and declining service delivery have further weakened property valuations and market sentiment. While large and small property players face these pressures, smaller firms are often more vulnerable due to higher operating costs due to a lack of economies of scale, which can erode profitability and asset valuations.
What are the key challenges that small-cap property companies face, and how can they overcome these hurdles?
Generally, small-cap companies face similar challenges to their larger counterparts, but the key differentiator is the potential liquidity discount on their shares, which can lead to higher funding costs. The discount placed on smaller shares can somewhat be countered by smaller companies strengthening their value propositions and maintaining high-quality management teams to enhance investor confidence and attract capital.
How can small-cap players effectively compete with larger property firms that have more resources?
Small-cap companies need to have a clear niche to effectively compete with their larger counterparts. This differentiation must be clearly communicated to the market to ensure their share prices are accurately valued and not mispriced.
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