How Eskom price increase will negatively impact the commercial property sector

Posted On Saturday, 09 March 2019 18:16 Published by
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John Jack, CEO of Galetti Corporate Real Estate.

 JOHN-JACK

‘’Commercial industries that are already sensitive to parastatal price increases will feel a significant impact. The mining sector is already under pressure, and further price increases such as this may lead to more mine closures with mining companies exiting South Africa. This will obviously impact job losses significantly. The Minerals Council of SA has already warned of extensive job losses should electricity prices be increased.’’

‘’Electricity prices significantly impact total occupation costs, and so occupiers consider such costs carefully. We are already seeing an increase in businesses looking towards newer more energy-efficient buildings that offer more affordable square meterage utility costs.  As an example, electricity on average for a newer P-grade building costs approximately R12 to R18 per square meter per month whereas an older building with poor energy efficiency can cost as much as R50 per square meter per month. Our figures already show that Green star buildings have far shorter vacancy periods than older buildings, and energy efficiency/cost is a direct contributor to this. Today’s electricity price increase will force occupiers to think carefully about total occupation costs and perhaps consider smaller spaces in newer energy-efficient P-grade buildings.’’

‘’We can expect investor and business confidence to be negatively impacted with the news of the price increase. The knock on cost directly affects profits margins, specifically in the mining and manufacturing sectors. This will lead to a tougher trading environment across the commercial property sector.’’

‘’We can expect buildings that offer solar or off-the-grid infrastructure to become increasingly appealing to occupiers. It will be interesting to watch how the cost per square meter of these buildings varies with this increase in demand.’’

‘’The good news is that the increase is far less than what Eskom already proposed, which will soften the blow slightly. We can thank NERSA for this, unlike the Rail Transport industry which is unregulated.’’

Last modified on Saturday, 09 March 2019 18:25

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