Getting the most out of property assets.

Posted On Monday, 24 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 (Cres)
at Old Mutual Properties. CRES focuses exclusively on helping users
to derive maximum benefit 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 advises companies with excess space or properties to study
the current market and analyse where to 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 rent
and/or greater tenant improvement allowances.'


Schirnig says although one's need for additional space may not be
immediate, negotiating a sweet deal for more space now could very
well save one money in the long run.


'Sometimes growing companies have viable options other than increasing
space.'


He suggests that before  companies rush out to buy a new building or
lease new space, they should analyse 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 maximise employee density within the existing
space?


'Is it possible to reconfigure the floor plan to better utilise 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 to buy if the owner offers to sell the
entire building.'


Before making a reactive decision to a convenient situation, business
owners should stop for a moment and gain perspective, he adds.


For example, does the building truly fit their business operations?


Schirnig adds: 'Having a solid strategic real-estate plan could allow
businesses to come out of tight economic conditions stronger than
when they entered.'


Publisher: The Star
Source: The Star

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