14 / 40
April 2015
Housing
issue presently impacting the sales
of commercial properties is the cost
base related to municipal rates and
energy increases that in many cases
have outstripped the growth in rent-
als. Where rentals have been low,
many potential purchasers of build-
ings have held back from making an
investment when viewing energy and
rates costs.”
“Where businesses are owner-
occupied, they have taken advan-
tage of various subsidy schemes
on offer to reduce energy costs.
Typically, ‘greening’ their buildings
has involved retrofitting lighting
systems and obtaining cost-efficient
equipment such as electric motors.
It is more difficult to achieve these
operational savings when premises
are rented and the landlord has to
shoulder some of the cost burden
involved.”
“Aswastobeexpected,theprimary
area of activity in the owner-occupier
segment during 2014 was Gauteng.
In KwaZulu-Natal, the commercial
property market is fairly even-
ly split between investors
and owner-occupiers.
The Western Cape
i s f u n d a m e n -
tally different
with investors rather than owner-
occupiers taking the leadon commer-
cial property purchases. The Eastern
Cape market is dominated by a few
large investors. This makes entry
into the market in the Eastern Cape
difficult for smaller owner-occupiers
and investors in the region.”
The Mozambique Corridor, where
significant government and mu-
nicipal spend has taken place, has
encouraged the growth of business
and stimulated activity in the owner-
occupier sector.
“The same dynamics apply near
the Coega development area in Port
Elizabeth, and industrial develop-
ment zones that have been estab-
lished in East London in the Eastern
Cape, as well as the Dube Trade Port
near Durban’s King Shaka Interna-
tional Airport,” says Webb.
“What will continue to drive in-
vestments by owner-occupiers is the
fundamental difference that exists
between landlords and business
owners looking for a sound invest-
ment. The investor needs to weigh
the cost of the purchase or build-
ing project against rentals
that can be achieved.”
■
Owner-occupier investment drives growth
Business owners continue to purchase commercial
properties at levels experienced in 2012/2013.
T
his is a vote of confidence in
the future of our country’s
commercial property market,
says Brett Webb, Head of Specialised
Lending: Specialised Sales and Com-
mercial Markets at Standard Bank.
According to Webb, “Despite the
downturn in the economy and ex-
pectations that interest rates will
increase further in 2015, clients are
still buying property, but becoming
more selective in their purchasing
patterns. To date, negotiated ‘owner-
occupier’ transactions are in linewith
2012/2013 figures and experienced a
44% upsurge.”
The specialised lending portfolio
includes propertiesworthaminimum
of R5 million and clients with a mini-
mum turnover of R10 million and a
maxim turnover of R1.2 billion. The
typical property purchase agreement
is for a period of 10 years. Buyers
typically borrow between 70 to 75%
of the property’s value - the owner-
occupiers equity contribution being
driven by factors such as demand for
the property etc.
One of the strong factors driving
the owner-occupier market is that a
combined view is taken on the client
and the property to determine the
client’s level of equity contribution
where a purchase is concerned.
“There is no doubt that owner-
occupiers are taking a longer-term
view of the market and are making
property investments only when the
stability and potential of their mar-
kets and company cash flows have
been carefully examined. Factors
impacting on property purchasing
decisions have also been influenced
by the rentals being paid in the geo-
graphical areas in which businesses
operate. In areas that are less in de-
mand rentals have remained static or
declined,” says Webb.
He goes on to explain, “The major