PROPERTY: Tenants Negotiating Better Deals
Recent Western Cape Business News
Despite a tough year, challenged by a depressed property market, one of Broll Property Group’s top achievers – Sia Thomatos, recipient of the Broll Cape Broker of the Year Award – believes that the commercial leasing property market is slowly showing signs of recovery.
Specialising in commercial leasing and owner-occupier sales, Thomatos says that tenants are increasingly looking for deals that offer greater value.
“Prospective tenants, whether they are looking for a renewal or new premises, are doing their sums. They’re also more informed when it comes to available properties on the market.”
Thomatos notes that tenants are also proactively negotiating with property owners, in order to get the best deal. And they are also prepared to endure the inconvenience of a move if need be, provided they get the value they’re after.
“Tenants are no longer signing deals quickly – they’re carefully considering all relevant facts, including their exact space requirements. They are also increasingly taking advantage of attractive tenant installations offered by new developments. If it’s cheaper to move, then it’s likely they will do so.”
Thomatos has seen that five year leases and five year options are still the most popular option for larger companies seeking space. “For smaller companies we prefer to advise that businesses do not commit to a lease longer than three years.”
Reflecting a tough economic environment, with some businesses battling and more space becoming available, Thomatos has also noted a general increase in sub-leasing, with escalations currently running at approx. 9%. On larger deals, this can drop to 8%.
New developments are also offering excellent deals, which include tenant incentives, higher fit-out allowances and some rent-free periods. “One new development, which initially launched with rentals of R120 per sqm, has brought this down to R95 per sqm – another indicator of the soft market.”
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