Saturday, December 15

Landlords must unlock value in properties

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Office tenants need a good deal and nurturing

With owners of commercial property still facing headwinds, landlords should not forget that tenants need nurturing and a “good deal” to stay loyal, says Norman Raad, chief executive of Broll Auctions & Sales.

Raad says there is a downward pressure on rentals, making new developments seem unfeasible and too expensive.

“This will correct over time, but not in a struggling economy. In tough times, there is nothing to keep tenants in offices besides a good deal, so it would be prudent for landlords to rather make rentals affordable than lose tenants, especially as replacing a tenant comes at an increased tenant installation cost contribution.”

He says the industrial property landscape is changing dramatically, with older buildings becoming almost totally obsolete as the market moves towards “big boxes”.

Consequently, the investor or landlord must be innovative to unlock the value in their properties as trends change and the market faces increasing challenges.

“Today’s buyer also invariably faces challenges when trying to raise finance through an institution as cash flow challenges are the norm in a tough economy.

“There is likely to be a massive move to selling vacant and non-core assets, with the market experiencing serious activity going forward as it starts to correct itself after a history of overvalued properties. Realism is fast setting in regarding the valuing of assets.

“Obviously, this depends on the area and position of the property.

“For example, Cape Town still enjoys more demand than supply, though there seems to be some softening in the residential development sector.” 

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