Friday, April 19

Commercial property: Traffic congestion plays big part in location

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How congested traffic and rising petrol prices are hitting commercial property hard

Petrol price increases and traffic congestion are proving to be huge challenges for South Africans and this is having a knock-on effect on the commercial property industry.

Lifestyle changes are also seeing commercial property owners and managers rethinking their strategies and priorities. When the fuel price increases, the costs of products and services that rely on transport also increase, and this has a ripple effect on industries across the board, including property.

Landlords need to increase their rentals per metre and parking costs also rise, says Chad Shapiro, senior commercial broker and director at CTS Property Services.

Consumers are then impacted by these increased, costs as are employees who commute to work. “Trends are pushing people toward using public transport, especially people who leave and come home from work at regular times.

This factor is not going to change. World trends are leaning toward standardised transport in the form of public transport and electric vehicles, although we are slightly behind the rest of the world in both of these trends,” says Shapiro. 

Detlef Struck and Kobus Conradie, partner commercial specialists for Lew Geffen Sotheby’s International Realty, say the main considerations for businesses when choosing their premises are rental prices and a central location to cut their employees’ travel time to work.

During the past year Conradie has received “numerous inquiries” from buyers looking for properties in areas where the least number of their employees would have to travel great distances to work.

Most of the country’s commercial markets are currently in over-supply, which is seeing declines in rentals and selling prices. Picture: Samuel Lee

“I’ve also had requests from buyers/ tenants wanting to rent premises close to train stations since most of their workers and customers use public transport.” 

Remote working is also a growing trend for many of these reasons, says Mark Latham, managing director Pam Golding Commercial Africa.

However, it only works for specific types of businesses and employees. Conradie says the internet has opened a “range of opportunities” for many employees to work remotely from anywhere in the world.

“We are seeing a growing number of people who rarely go into the office. This is especially convenient for moms being able to work at home during maternity leave. “I have also come across people working for international firms being paid in dollars, euros and pounds, but working from their homes in South Africa.”

Another growing trend impacting the commercial property market, Latham says, is mixed-use developments offering companies and employees an opportunity to operate in environments which incorporate the live, work and play aspects of life. Shapiro says the main factors affecting where business owners choose to work include proximity and convenience for their clients, and convenience for themselves and their staff.

Over-supply squeezes prices

The current economic and sociopolitical climate in the country is putting the commercial property under “severe pressure”, says Pam Golding Properties’ Mark Latham. Most of the country’s commercial markets are in over-supply and this is resulting in downward pressure on rentals and selling prices.

“This is compounded by little to no economic growth, which is resulting in occupiers shedding space rather than acquiring it. They are also actively looking at ways to further reduce occupancy cost through the restructuring of lease agreements or strategic moves to capitalise on current market conditions.”

Buyers and sellers are also sceptical about the market, says CTS Property Services’ Chad Shapiro. Lew Geffen Sotheby’s International Realty’s Detlef Struck says: “Potential commercial property buyers are hesitating to invest.”

His partner, Kobus Conradie, says buyers are making lower offers for property, making it more difficult to conclude sales. “There has been a decrease in qualified commercial property buyers, since they are waiting for the market to lift its head. “This has positively affected the commercial rental market with more clients interested in renting space.”

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