Companies urged to use soft property market to plan ahead.

Posted On Tuesday, 18 February 2003 10:01 Published by
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Companies have been urged to use the soft property market now being experienced in most parts of South Africa for their long-term benefit.

Companies have been urged to use the soft property market now being experienced in most parts of South Africa for their long-term benefit. 

“The pendulum has swung firmly in favour of the creditworthy tenant,” says Michael Schirnig, head of Corporate Real Estate Services at Old Mutual Properties. CRES focuses exclusively on helping users make more out of property. 

“Now’s the time to make the most of property assets, whether owned or leased. It’s an ideal climate in which to shape a strategic property plan that anticipates space needs and provides growth or contraction solutions that meet the company's financial and operational objectives.” 

Schirnig says companies with excess space or properties should study the current market and analyse where they would get the best return on investment.

 “If you are operationally indifferent as to which properties to keep, look to sell or sublease the space that would garner the highest return. In other words, give the market what it wants – as long as it doesn’t negatively affect your own business objectives.

“Companies with substantial growth projections won’t find a better time to take on that additional space. With subleases abounding and vacancy rates at above average levels, landlords are quite willing to negotiate rates.

“Often tenants are also able to secure better terms and more incentives, such as free rent and/or greater tenant improvement allowances. Although your need for additional space may not be immediate, negotiating a sweet deal for more space now could very well save you money in the long run.

“Sometimes growing companies have viable options other than increasing space. Before they rush out to buy a new building or lease new space, they should analyze their current situation. Would they be better served by investing money in new equipment to increase productivity, without adding space or employees?

“Is there a better way to maximize employee density within the existing space? Is it possible to reconfigure the floor plan to better utilize space relationships, thereby increasing overall productivity? “

Schirnig says market conditions are such that companies can be selective, and should not settle out of convenience

“For example, a business that leases a significant portion of a building might be tempted if the owner offers to sell the entire building. Because it already operates out of the building, has a significant investment in tenant improvements and has several years left on the original lease, this might sound like a good idea.

“Before making a reactive decision to a convenient situation, the business owners should stop for a moment and gain perspective. Does the building truly fit business operations? Are they ready to become a landlord?  

“Having a solid strategic real estate plan makes the answers to these questions clear. It also can allow businesses to come out of tight economic conditions stronger than when they went in.”

ISSUED FOR Old Mutual Properties

BY Michael Kerkhoff & Associates

ENQUIRIES Michael Schirnig 021 530 4561

                   Michael Kerkhoff 021 424 5280


Publisher: Michael Kerkhoff & Associates
Source: Old Mutual Properties

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