An Interview with Jiten Kerai, General Manager Purple Dot International Ltd
1. What major trends have you noticed in commercial real estate in the recent past?
On a macro level of course the economic, sector is still recovering from last year both globally as well as locally. The banking sector had tightened lending, rental collections were problematic and investors continue to be cautious so we see that property types like industrial, warehousing, health care facilities have been positively disrupted while hotels, offices, and retail are still the most affected end of the spectrum.
We do see a gradual but upward improvement since August last year.
In view of office spaces especially, we see the need to look at things differently – given that most companies may have to adopt a hybrid model or at the least look at workplace space management.
As Purple Dot, we are taking these insights into account as we plan our upcoming warehousing and office space projects with our investors being well informed and involved in the process.
2. Are there new demands/needs from commercial real estate tenants and how are investors adjusting to meet these new demands?
The changes we experienced last year means uniquely different things for different sectors. For retail, we saw the need for a shift and digital transformation in-store and at distribution points for example.
Construction, logistics, and other labor-intensive sectors slowed down but were less prone to fundamentally change their operational processes.
Most businesses are on a learning and recovery curve, so it is very likely that as tenants’ businesses find new ways to adapt, there will inevitably be a change in how developers and consultants guide investors to adjust accordingly.
And so, moving forward, finance, operations, people, and technology (cloud, e-commerce, AI) will certainly impact how tenants and subsequently investors adjust to changes.
As Purple Dot, we have seen the need to support our investors and tenants giving room for financial flexibility for the better part of last year. We also continue to research what the market really needs before implementing the project plans.
Tenant experience continues to be at the core of our decisions and this January, we made structural adaptations by adding a third level to our new warehouses based on tenant and investor insights.
3. In the retail sector, logistics companies seem to be taking over as retail moves online to e-commerce. What changes are commercial properties making to cater to this new generation of logistics companies?
The logistics platforms certainly picked up out of necessity during last year’s initial panic.
Essentially though, locally the supply chain for retail has not changed – it merely shifted more online compared to the traditional instore during the pandemic in 2020.
Globally as well as locally a lot of retail chains closed down or downsized last year, with huge inventory build-up overall. And as most retail stores re-open it would be interesting to see whether the omnichannel offerings show balanced sell-out or shoppers continue to only lean towards online shopping. Bear in mind, the largest problem e-commerce faces is returns and this has its own impact on logistics and cost.
From an inventory perspective, for retailers who can efficiently fulfill their online or in-store orders, there will always be a need for storage facilities and distribution centers.
Consequently, the type of supplier warehousing facility, smaller distribution, or despatch office still depends on buyer locations, pick up points, and the retailer’s operations and customer service model.
Some retailers opt for our Graylands warehouses for exactly this reason.
4. Payment plans have been a hotly debated topic in commercial real estate, given that most plans are rigid and almost unaffordable to small entrepreneurs. Are there notable changes in this area?
There are many factors at play here, that affect payment flexibility.
The banking sector certainly plays a role with lending limits, rates, and payback periods. And also given that we currently do not have a structured real estate regulator or credit scoring, we find that having proper plans sometimes helps de-risk and filter out any chances of high delinquencies right off the bat.
However, when the entrepreneurs are genuine, known, and have proven credibility most developers are quite open to flexible payment plans. It goes both ways – the entrepreneur should equally, also invest where he has found proven credibility.
In Q2-Q3 last year for example, at Purple Dot we saw the need to support investors with flexible payment timelines and adjust tenants’ rental charges during the lockdown period. We continue to support our investors with flexibility on payment plans and most developers would be open to this.
5. There is a sudden shift from CBD to the outskirts and suburbs, why is this the case and how is this beneficial to businesses?
Well in recent years CBD has had understandably limited adapting in terms of traffic lanes, parking, demand for better offices, security among other things so we saw a visible shift to Upper Hill and Westlands. With the increasing number of quality commercial office spaces, hotels designed for business conferencing along Waiyaki, in Lavington, and greater Westlands among other areas, more corporates and SMEs chose to move out of CBD. When companies expand their regional offices or retail outlets it’s always a good sign – more jobs, more innovation, and upskilling.
Expanding road infrastructure, rise in housing developments, and dormitory towns like Athi River, Machakos, Limuru we find that there is the urban sprawl that has been on the upward trend now for a few years.
At Purple Dot, we are currently in the process of redeveloping an existing building into Purple Tower along Mombasa Road. It’s an EDGE certified mixed-use development with premium offices, retail, and a restaurant that will truly revitalize the area.
As Live, Work & Play commercial spaces continue to gain popularity, are there trends/features in such developments (both Mixed-Use and Business Parks) that are attracting the attention of businesses?
Well, different areas will attract different property uses – malls, for example, can have this synergy of offices, conferencing facilities combined with restaurants and cinema, entertainment use areas. We don’t expect a functionally well-designed office tower to suddenly renovate and add a movie theatre to attract businesses.
However, we still see the demand for purely office spaces with changing needs for specific amenities that range from better parking, hoteling and hot-desking, conferencing to gyms.
At Purple Tower for example, based on our research we have accommodated two levels of parking with about 600 bays, a central atrium for natural sunlight, aesthetic use of design space, reduced energy and water usage among other exciting features.
Still on Mixed-Use developments, which categories of businesses/professionals are benefitting from such properties?
We see a mix based on the businesses’ primary clients and building location.
So MUDs in Westlands will attract a different kind of client compared to Upper Hill or Mombasa Road.
For Purple Tower, we see businesses that have factories in neighboring Upper Hill, Industrial Area or further down Mombasa Road, Mlolongo, etc wanting to have a main administrative office along Mombasa Road.
We also find professionals like lawyers, consultants, banks, and other specialized service providers that either want to move out of CBD or need access to JKIA and the main highway.