Commercial Property market insights - not all doom & gloom
Category Property
Although most businesses are working at full capacity again, Abacus DIVISIONS, a Commercial Property Broking firm, reports that the activity levels in the parks that they operate in are at about 60% of the number of occupants entering and exiting these parks compared to the same time last year. Org Geldenhuys, Principal for Abacus DIVISIONS says, "This obviously supports the argument that people have elected to work from home where possible and only come to their official place of work maybe once or twice a week."
Most landlords with vacancies going into the lockdown period reported slower than expected uptake of space once businesses opened up again. He adds, "This is obviously a worrying trend for commercial property owners, for now, and we don't know how long this will last."
"Rentals remain under pressure and vacancy rates are up across the board between the industrial and office accommodation for the same period last year. Prospective tenants are operating from the understanding that they are now in the driving seat and have made full use of the opportunity to drive a hard bargain, leaving landlords on the back foot and short of income. Landlords remain under pressure and returns on commercial property are definitely down. We think this is going to continue well into the next year. The predictions from bankers and economists are that the tail of the downswing could be as long as 2 years."
On the sales front, we have concluded a number of sales with buyers making full use of the lowest interest rate in many years - and rightly so. Owning a property now far outweighs the arguments for rental. Buyers almost all fall within the category of "Owner Occupiers" as it just make sense to own your own commercial property than to rent in these times. Most buyers do shy away from investment properties as the pressure on rentals and the ever-increasing rates & taxes and operating costs squeezes returns to levels where the risk currently outweighs the rewards.
Geldenhuys is worried about the levels of increase in operating costs for commercial property. He says, "Increases in rates & taxes and operating costs to almost unsustainable levels are probably going to be with us for many years to come and will be the new normal for commercial property owners. This is as a result of city councils using rates and taxes as an easy option to increase income and balance their bulging budgets, knowing full well that commercial property owners don't have many options to stop the ever-increasing rates and utility costs. Tenants are already feeling the pinch and will also start pushing back, with most being unable to absorb all the increases, leaving landlords to pick up the slack."
However on a more positive note, Geldenhuys says, "It's not all doom and gloom out there. Property is the one sector that presents opportunities in both the up and down cycles - one just needs to know where to look! There are certain classes of property that make a killing at the moment including Zoned Residential Development Land, which is mostly driven by demand from home buyers taking advantage of the lowest interest rates in decades. Zoned industrial land is another good pick at the moment. The demand here is largely driven by the logistics, distribution and warehousing sectors supporting businesses in their move to online marketplaces. If you are developing offices for Owner Occupiers or freestanding units to provide an own identity, you are servicing a niche market that's ready to buy now. Renting to the co-work or shared office space market is also a growing trend picking up on the need to downscale operations or to have a hybrid workplace linking the working-from-home crowd with some sort of formal place that they can call the office."
"If you are in the market to buy, sell, rent or lease, then may I suggest that you speak to a commercial broker who understands these difficult times - someone who can help you to navigate your Commercial Property needs and get you the best possible deal out there."
Author: Private Property
