Start a Property Conversion Business

Property conversion (not to be confused with the law with the same name), is the act of taking a type of property and converting it for another use. This can be as simple a residential to commercial conversion (or vice versa) or a more radical such as warehouse to entertainment venue conversion.

I will be looking at it here as a whole and then popular ones will be looked at individually.

The Opportunity
ZA permabears like myself who are pessimistic and negative about South Africa’s trajectory under the current dispensation have been proven right and those delusional developers who believed that SA will grow and built a glut of office parks, shopping malls and other commercial spaces have been proven wrong. South Africa’s economy is just not growing fast enough (or at all/ in fact it will probably be going backwards) to accommodate all these spaces. This means that:

  • There are too many warehouses, manufacturing has declined in recent years. Most warehouses are simply used for storage and distribution.
  • There are too many office parks, yes COVID has sent people working from home, but a bigger virus called ANC put paid to South Africa becoming a high-growth business hub to accommodate all the space that was built.
  • Too many shopping malls. I mean really? How many do we need? Developers who’s malls were burnt down during the Zuma riots should have taken the insurance money and run away screaming.

What we will see is:

On a macro level: we will see big spaces being divided up to smaller “WeWork” style spaces. Outside of major entities nobody can afford shops, offices and warehouses of hundreds of square meters. They will have to be divided up or owners will take a loss. My advice to owners still resisting: get with the program no multinational is coming to take the space.

Office to residential and/or accommodation conversion. Yes, it is much easier to turn a office park into a hotel but do not rule out apartments either seeing that Balwin style fish tanks and chicken coops are considered apartments. We will see the same happen with commercial to student accommodation conversion especially those sucking on the teat delivering the sweet nectar of tax-payer money (NSFAS). Pro Tip: if you can’t get on the NSFAS accommodation gravy train try textbooks you’ll be joining me in Tenerife next year – that is if you are not too busy counting your money.

Warehouse conversion
South Africa has too many warehouses and too many industrial areas, we are rapidly de-industrialising and there is no need for so many places that import and distribute.
Warehouses can be converted to schools, entertainment: nightclubs and rave venues.

Business Models
There are a few opportunities that will open here. From the top:

  • Buying and doing the conversion which is the most capital intensive.
  • Building contracting, construction, renovation and maintenance
  • Or an agency specialising in managing these spaces. It is unlikely that the owner will take all these roles upon themselves.