The current economic situation in South Africa is putting pressure on the commercial property industry, with rising vacancies across the board.
Some commentators have noted it is “one of the toughest property sector environments in two decades”, says Gregg Huntingford, chief executive of Spire Property Management.
But it is not all bad news if property management companies are willing to change the way they usually operate.
He says to maximise occupancy within a building and engender long-term relationships between tenant and landlord, the time has come to “do things differently” to suit each individual customer. Vacancies cost money, so tenant attraction and retention is a priority.
“To achieve this it is important to realise that rent is the by-product of the property process, not the main driver. Can a business trade is the more important question. Get that right and the rest follows.”
Through strategic planning and the introduction of an innovative letting stimulus package, Spire has bucked the trend and is seeing reduced vacancies across all sectors, says St John Gardner, executive director of Spire Property Management. This is in contrast to most of the industry.
Following the acquisition of the properties, he says Spire’s vacancies in the industrial property sector have gone from more than 10% to below 2%. Retail vacancies have also enjoyed an improvement, particularly in the community centre genre, and have gone from about 4% to less than 1%, while store vacancies remain unchanged at a very low sub-1% level. Office vacancies sit at the 2% mark, having seen an improvement from nearly 5% in November 2017.
“There have been many ways to address rental structuring.
"For instance, for certain properties we offer 'rent-free December', allowing for businesses’ cash flow constraints over December, when bonuses need to be paid, staff go on leave, and offices close for a large period of the month.”
He says not having to pay rent for the month can be a “huge financial relief” for these businesses. Because the property runs with lower operating costs that month, it is viable all round.
It is all about understanding the needs of all the building stakeholders.
Longer competitive rent-free periods which can be staggered through the lease period for certain properties can also be fashioned to aid owners and tenants alike, Gardner says.
In addition to this and based on how Spire has carried out its stimulus package programme, Gardner says letting strategies should be exceptionally focused, with detailed and targeted strategies devised to identify the perfect tenants for certain properties and look at the strategic value of individual tenants. Property management companies should then actively pursue these tenants and work with them to structure a suitable rental package that works for all parties.
“This way we also ensure the perfect tenant mix - essential for retail clients. It is extremely important for a centre to maintain the right tenant mix which talks to, and services the needs of, the consumers within that centre's vicinity. A tenant attraction strategy is of paramount importance. For this reason Spire also collaborates with a vetted selection of property brokers who are experts within their fields, who work alongside Spire’s in-house experts.”