PROPERTY: Tenants Still Struggling
Recent Western Cape Business News
There is mixed market sentiment as to whether the fall-out from the recent global recession is complete, or whether there are still pressures that will be felt by the property industry.
According to Marc Edwards, the Managing Director of Cape Town-based Spire Property Management, property rentals, particularly in the A grade commercial and retail space seem to have bottomed out. However, it is not certain how much longer the market will remain in this plateau before firming once more.
“A number of tenants are still struggling, which will result in continued pressure on vacancies and debtors going forward,” says Edwards.
“The main reason for this continued pressure, despite rentals being relatively low, is the increased cost of occupancy that tenants are faced with. This is primarily as a result of increased electricity tariffs throughout the country - with Eskom only recently promoting a future tariff hike.”
“These continued increases in utility costs have resulted in rentals coming under tremendous pressure. Landlords need to make reductions in the cost of occupancy their primary focus in the short to medium term,” says Edwards, who advises that the obvious place to start is electricity management, where simple changes such as converting to LED lighting or utilising other energy efficient light bulbs can have an immediate impact on a tenants cost of occupancy.
There are numerous consulting firms who can assist landlords in planning a strategic utility cost reduction and Eskom itself is very willing to engage with landlords to educate them on how to reduce their expenses and their impact on the main power grid.
Edwards advises that tenant education is vital for the success of any cost reduction strategy as they are the end users and can have the fastest impact. “Landlords should try and incentivise their tenants to reduce their demand wherever possible and there are many ways that one can do this, including transparent energy readings, up to the minute easy to understand demand graphs, etc. Many of these would be implemented once a consultant is sourced.”
According to Edwards, another important tool that must be used by landlords is that of benchmarking. “Landlords need to compare the performance of their buildings against similar properties in the same geographic area to ensure that it is matching, if not outperforming similar buildings.”
Benchmarking information such as this is readily available through SAPOA and IPD and should be used as a fundamental property tool.
“A reduction in costs in utilities not only makes financial sense but is hand on heart the right thing to do. It is a soft entry for landlords to discover this small part of the world of green building, which once understood will transform the way landlords conduct their business,” concludes Edwards.
The Green Building Council of South Africa (GBCSA) actively encourages existing buildings to improve their environmental performance and in 2009 the Council launched a publication entitled the ‘Existing Building Survival Strategies’ which is a guide to retrofitting existing buildings.
The GBCSA is set to launch an existing building energy and water performance benchmarking tool, which will help the owners of existing buildings to understand how their building performs in related to the industry norm. The GBCSA has also begun the development of an overall existing building tool that it hopes to launch in late 2013.
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