Opportunities emerging in the commercial sector post lockdown

Opportunities emerging in the commercial sector post lockdown

As per the latest Global Commercial Property Monitor (GCPM), sentiment improved in the final quarter of last year among professionals working in the global commercial real estate sector, returning to positive territory for the first time since the onset of the pandemic (-28 in Q1 2020 to +01 in Q4 2021).

Optimistic about the opportunities in South Africa’s commercial property market is Franz Gmeiner, Chief Executive Officer at Orion Real Estate. “Given the country’s tough economic conditions, compared to high-risk stocks and shares, commercial property remains a more reliable form of investment with capital growth over time, especially with certain sectors such as industrial and offices. The key is to stay focused on the long-term future and be versatile.”

Trends that will affect the domestic property market in 2022.

• Partial return to the office as the pandemic tapers.

• Exponential rise in online retail trade.

• Repurposing commercial properties to meet rising warehousing and residential demand.

• Concerns about environmentally sensitive properties

Office far from dead 

As firms adopt a hybrid approach to remote working and adjusted lockdown regulations boost a return to the office, the commercial office space is far from being a relic of a bygone era. Many companies are repurposing their spaces or have added new amenities to accommodate the new workplace norms.

“It has become apparent that the commercial office has a role to play for team meetings and other collaborative endeavours. The market is telling us that while many folks will still work from home, an office space is also helpful for colleagues to interact and enhance teamwork, innovation as well as productivity”.

However, offices will now be smaller, with social distancing in place. “Hot desk type services and systems that allow workers to book a desk for a day will also play an increasingly vital role in commercial properties of the future.”

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Repurposing buildings 

Another trend that will impact the commercial and industrial property sector in 2022, which had already gained momentum in recent years, is the repurposing of commercial property into warehousing space and last mile distribution centres to meet the burgeoning online shopping market.

A functionally obsolete building can easily be repurposed into a productive, profitable space. However, there is a desperate need for the government to intervene in some areas which are facing a climate of disintegrating infrastructure that is not conducive to business.

Focus on sustainability

South Africa’s commercial and industrial property sector is on the path to rapidly increasing its green building credentials. Local property firms have noted an uptick in demand for commercial and industrial properties that are more environmentally sustainable.

In April 2021 MSCI South Africa Green Annual Property Index results reinforced the association between quality and green-certified buildings, as reflected by a higher capital value per square metre, more resilient capital growth and a higher net operating income per square metre compared to the non-certified office buildings.

“There is definitely a business case for leasing and buying properties with environmentally sensitive features. The research has repeatedly shown that firms that are proactive regarding environmental sustainability tend to achieve higher financial returns. There is also, for example, the day-to-day financial saving on the cost of energy, due to the use of more cost effective renewable energy.”

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Operative infrastructure

A concern is our country’s infrastructure, “Currently we are seeing in KwaZulu-Natal, Gauteng, North West and the Free State in particular that poor performing municipalities and provincial governments are not keeping up with road maintenance and water service delivery requirements. This has a negative impact on businesses in the region, which then seek greener pastures in other provinces and shut-up shop, resulting in job losses.

Municipalities need to find ways to work with businesses to ensure that infrastructure is adequately maintained not only to attract new business and property development, but to retain existing commercial and industrial enterprises.”

Commercial property and development only works if good infrastructure supports it. “As a crucial component that connects businesses to their markets and employees to their work, adequate infrastructure is a key contributor to economic growth.”

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Gauteng rental market grows, but still the most affordable metro

Gauteng rental market grows, but still the most affordable metro

Pretoria East – R65,000 per month to rent this spectacular home in the Mooikloof Equestrian Estate.

Gauteng is home to the largest rental market in the country and according to TPN the rental market now stands at about 48% of all households.

While it is the largest rental market by far and the economic powerhouse, it is still cheaper to rent a home here compared to the Cape and about the same as the Durban area according to the Seeff Property Group.

The average rental for Gauteng is now around R8,379 compared to the Western Cape at R9,399 and KZN at R8,381 based on PayProp data.

The Seeff Group says that while year-on-year rental growth appears to be back in positive territory. While rental rates generally remain under pressure in Gauteng, top end tenants have paid up to R55,000 per month for a house in Dainfern Valley Estate and R92,700 per month for a luxury penthouse in Park Central in Rosebank; both leases concluded by Seeff Sandton.

Some highlights of the state of the Gauteng rental market include:

Pretoria East now a high-demand rental area for its apartments, townhouses and estates

According to PG van der Linde, rentals manager for Seeff Pretoria East, the area includes a choice of suburbs which cater to various price points, from affordable apartments to luxury estates and suburbs which attract business and government executives as well as ambassadorial staff.

For students and young professionals, areas such as Lynnwood and Menlo Park are popular due to the close proximity to schools and University of Pretoria. The area is cosmopolitan with restaurants and eateries and there are many new upmarket developments.

Rates start at around R13,000 for sectional title and upwards of R30,000 for full title in the estates and boom access control areas.

Equestria offers great affordability with sectional title units renting out at between R7,000 to R9,000 per month on average.

Woodhill Golf Estate and other estates average at around R30,000 to R80,000 per month at the top-end. Lifestyle and security are important considerations for tenants. Top-end estates are in demand with embassies and businesses for their staff.

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Centurion popular for its easy access to Pretoria, Midrand and Johannesburg

Tiaan Pretorius, manager for Seeff Centurion says the area has an active rental market and rents have remained stable.

Top attractions for the rental market include great schools and amenities and a high volume of security complexes and estates.

Rates for apartments range from about R7,000 to R10,000 per month while houses in security estates rent for around R15,000 to R20,000 on average per month.

Sandton, Fourways and Midrand remain prime areas for access to the Sandton and Midrand CBDs

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Rochelle Holland, rentals manager for Seeff Sandton says rental rates have remained fairly stable. While top-end rentals can range to about R195,000 per month for a spectacular high-end estate in Sandhurst, there are many affordable areas for young professionals and families alike.

The highest demand is in the R7,000 to R12,000 per month range. Apartments in areas such as Rosebank and Dunkeld West which offer modern living are priced at around R27,000 to R28,000 per month.

Affordability is a key characteristic of Midrand. Apartments start from just R6,000 and houses upwards of R8,000 although top-end homes can go to as much as R25,000 to R40,000 per month.

Randburg offers solid middle-class affordability close to Sandton and business nodes

John O’Reilly, rental expert for Seeff Randburg says Randburg is a vast area characterised by affordability combined with a great location with easy access to Sandton and many business nodes, top schools and amenities.

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Rental rates remain affordable at around R6,200 to R11,500 on average with family houses ranging to about R16,000 to R18,000 per month.

In great family areas such as Ferndale which borders the Sandton area, you can find apartments from R5,500 to R11,200 per month. Randpark Ridge also offers great value with apartments from around R6,000 to R11,000 and houses from R15,000 to R16,000 per month.

Johannesburg South offers some of the most affordable rentals

While the more affordable rental market experienced significant challenges, Claire Store from Seeff Southcrest says areas such as Southcrest, Verwoerdpark and Alberton are doing well as they offer some of the best value.

These areas are safe and well-maintained and offer proximity to schools which is great for young families. Rates range from around R7,000 to R10,500 on average per month, but can go to R12,500-for a top property.

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Is winter down cooling the residential market?

Is winter down cooling the residential market?

Unlike other industries, the real estate market does not necessarily slow down over the Winter period. In fact, statistics from Southern Africa’s largest real estate brand reveals that demand for real estate is fairly stable all year-round.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, explains that the brand’s records for the last three years (2019-2021) reflect that sales do not differ greatly between the Winter months (March-Aug) compared to the Summer months (September – Feb).

 

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“The need to buy and sell real estate exists year-round. This becomes apparent if we analyse our sales trends over the last three years. The only year where trends changed was in 2020 and this was owing to the hard lockdown that occurred in May until roughly the end of July.”

Despite the fact that house sales do not slow over the Winter season, those who put a property on the market during the colder months still need to be aware of certain practicalities.

For example, Goslett explains that properties generally receive less physical traffic and more online attention during the rainy seasons.

“Fewer people are likely to attend show days and physical viewing appointments in the rain. Sellers will need to ensure that their online listing is really enticing by posting high quality photos and by mentioning all the extra features in the description.”

When a buyer does come through for a viewing, Goslett recommends having a welcome mat at the front door to wipe off muddy shoes before walking through the home. “Try to make the space feel as warm and cosy as possible. Switch on a heater or light a fire before the guests arrive and on cloudy days, turn on some lights so that the home does not feel dark and dingy. These tricks can make the space more appealing and could help you sell over the colder months,” he notes.

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Goslett also highlights that by spending more time indoors over Winter, many homeowners come to realise the shortcomings of their property, which can sometimes push them towards selling. “If you are considering the option of selling this Winter, keep in mind that it can take around three months for a transaction to go through, so you might only move into a new home in the Summer.”

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Tops tips when working with a general contractor

Tops tips when working with a general contractor

Renovating a home can be stressful, especially for those who are managing the project themselves. To eliminate stress, some prefer to hire a general contractor to run the whole build themselves. This solution does not come without its own challenges. Homeowners will need to remain vigilant to ensure that the project does not run over time or over budget.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, explains that one of the first aspects that needs to be researched thoroughly is the competency of the contractor.

“The success of a building project will be based on how competent the contractor is to complete the project within the allotted period. If the property is not finished within the expected time frame, it can have some harsh financial implications. Not only will you then have to fit the bill for extra labour costs for every hour that the build goes over, but you might also need to pay for temporary housing until the build is ready,” Goslett warns.

To mitigate this risk, Goslett suggests that homeowners only work through those who are certified by the National Home Builders Registration Council (NHBRC). NHBRC aims to reduce the risk of substandard building work as much as possible and ensures that only qualified, experienced contractors are used to build homes.

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Beyond this, here are a few top tips on how to manage a successful build when working through a general contractor:

  1. How will subcontractors be managed?

Most general contractors will hire other trades (including plumbers or electricians) to complete some of the work. To make sure the project continues to run according to schedule, find out how your contractor plans to manage other trades and what will happen if a sub-contractor is delayed or postponed. It is also important to check that the contractor only hires licensed professionals whose work will be up to scratch.

  1. Request an itemised quote

The best way to ensure that a project stays within budget is to request an itemised quote for the work that needs to be completed. Where possible, select the exact fittings (brand, shade, etc.) so that you know beforehand how much each item will cost. If you haven’t selected these features yet, the general contractor will set aside an allowance – but this is where things can easily end up costing way more than initially planned.

  1. Conduct onsite progress meetings

To avoid unnecessary delays, hold the contractor accountable for progress by conducting regular site inspections. If anything is running behind schedule, find out what the contractor plans on doing to get the build back on track.

Regular site inspections also help to correct any issues before it becomes too costly to repair. Sometimes the contractor might misunderstand what you envisioned for the space, for example, the contractor might install the tiles horizontally instead of vertically. Being on site regularly helps to spot these mistakes early so they can be corrected before the build is finished.

  1. Allow some breathing room

The only thing that you can plan when renovating or building is that things will never go 100% according to plan. Set aside some extra money for unexpected costs and plan for the project to go over by at least a week or two. This will alleviate some of the stress and pressure from the build.

“As stressful as the build might become, homeowners should remind themselves that upgrading a home is always a good investment decision when undertaken wisely. Ask your local RE/MAX real estate professional to value the property after the build to see how much the project may have increased the home’s overall value,” Goslett concludes.

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Property partners show young people how to build a property business

Property partners show young people how to build a property business

Opportunities for regeneration and densification in South Africa’s inner-cities and townships remain central to sustainable urbanisation and economic inclusion. With this in mind and to coincide with Youth Month, TUHF and uMaStandi sponsored the South African Property Investors Network (SAPIN) Youth event, aimed at engaging with young people to provide them with an introductory framework on becoming property investors and entrepreneurs.

The event, held at the Soweto Theatre on 11 June, was aimed at breaking the cycle of township poverty. Daniel Kazadi, property entrepreneur, SAPIN Youth Leader and event host, believes property and rental accommodation hold the potential to create employment and income for many young people who are struggling to carve out career paths in the formal sector.

“The mission of this event was to demonstrate to young people that there is hope for them in real estate. By taking control of the course of their lives and building the skills they need to become property owners, young people can grow sustainable income streams and their own property/investment businesses,” says Kazadi.

To lay the foundation, a broad line-up of industry experts took attendees through the basics of financial literacy, entrepreneurship and business administration, property law and contracts, opportunities as both investors and letting agents, as well as the characteristics of a high-performing property portfolio.

Simnikiwe Ntyantya, Credit Analyst at TUHF21 says most young people think the idea of becoming property owners or landlords is out of their reach, but it is possible to start small.

“The key is to be innovative. There are opportunities created through urban regeneration and densification. TUHF21 is focused on developing new solutions based on relevant and practical research to help young investors get a foothold in the property market. Through uMaStandi our aim is to attract new investors in township markets to take advantage of these dynamics and build sustainable wealth,” says Ntyantya.

uMaStandi is a lending programme that aims to deliver inclusive impact and change young people’s lives. “These are not easy markets to understand at first, but as we spread skills and knowledge through events like these, we will be able to scale up across South Africa and ensure that urban management and regeneration is driven through collaboration with communities and local government,” adds Ntyantya.

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uMaStandi’s target market is entrepreneurs who provide accommodation in townships – a niche of the property market neglected by traditional commercial finance sector players. “uMaStandi uses the power of commercial mortgage finance to assist property entrepreneurs to increase the value of the properties and earn an income using the property as equity to fund a rental enterprise, with the construction then being professionally designed and built to meet all required planning permissions. We guide entrepreneurs in building multi-let rental units within the regulatory requirements and provide quality affordable rental units. Our goal is to grow this product rapidly in all major townships across South Africa, sustainably,” explains Ntyantya.

The Youth event in Soweto was designed to share basic knowledge to spur greater interest in property as an investment, while also outlining resources for specialised skills that can step in as necessary while young people build a property portfolio. “We don’t just want to show that there are ways to make money from property as a young South African. We need to show how young investors can extract maximum value from their portfolio so that their business is sustainable and can build inter-generational wealth,” says Kazadi.

Other SAPIN corporate partners and sponsors to this event included Absa, Bolt, Ooba Home Loans, and Tile Africa.

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A guide for everyone to subletting

A guide for everyone to subletting

Subletting can sometimes be a tempting solution when life changes unexpectedly during the timespan of your lease agreement. While this can be a useful solution when undertaken correctly, subletting can also be incredibly risky, especially when correct procedures are not followed.

According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, subletting might offer a solution to those who do not want to lose their lease because, for example, they might have a short-term overseas job opportunity or perhaps they find themselves unable to keep up with rental payments. “However, not all lease agreements will allow a tenant to sublet the property. Tenants need to check their rental agreement before considering this as an option,” he cautions.

He adds that subletting can be a risky undertaking because all responsibility ultimately remains with the primary tenant. “If the person you are subletting to skips a payment or damages the property, you will still be held liable for it. That is why it is so important to screen potential sub-letters thoroughly and to set up a comprehensive subletting agreement before going ahead with this arrangement,” he recommends.

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There are several subletting arrangements, including:

  • A room-by-room agreement where the primary tenant sublets one or two rooms of the home while he/she continues to live on the property. Essentially, the primary tenant is sharing the space with a sub-letter, usually to help him/her afford the rental payments.
  • A short-term agreement where the whole home is sublet for a limited period only with the understanding that the primary tenant will return to the property to finish the original lease term. This is usually done when the tenant needs to be away from home for a period of time but plans to return thereafter.
  • A long-term agreement where the primary tenant essentially moves out of the property and allows a sub-letter to live in the home for the remaining period of the original rental agreement. Once the original lease expires, the primary tenant needs to either renew or the sub-letter will need to vacate the premises.

Although subletting can be useful in certain instances, it can also be challenging to manage and could pose risks to both the landlord as well as the primary tenant – which is why many lease agreements do not allow subletting. “If you do want to explore whether subletting is right for you, I would recommend chatting to a local RE/MAX Agent first to make sure you fully understand all the associated risks and can be better equipped to set things up correctly from the start,” Goslett concludes

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