South Africa’s managers of corporate properties are almost at the boardroom table, but not quite.

This emerges from Old Mutual Properties’ first annual survey of trends in corporate property. The study showed 56% of survey respondents – a mix of retailers and large office users, representing more than 2,5 million square metres - were neutral or disagreed that “corporate executives understand how important property is” and 62% disagreed that “property is perceived as a key asset”.

The research covered mainly businesses with turnovers greater than R500 million annually, with 52% of respondents owning fewer than 10 properties, 35% owning more than 30, and 60% leasing more than 50 properties.  The study indicated that South African corporate property managers typically report on property issues through a director (13%), the managing director directly (35%) or through the financial director (17%).

 “This contrasts sharply with practices in the USA and UK, where the corporate property function typically reports via the financial director and is struggling to get up the corporate food chain,” says Michael Schirnig, head of Corporate Real Estate Services at Old Mutual Properties.

 “Even though in SA the corporate property function appears to report to higher organizational levels than is typical overseas, property is still mostly seen as a liability, a simple monthly expense.  South African companies have more than R20 billion invested in property assets and billions more tied up in lease commitments, yet property is an often-overlooked company resource and is deserving of more focus. “

 So what is the key to improving the standing of property at the boardroom table? It starts with recognizing a shared goal: protecting and increasing shareholder wealth, according to Schirnig. "I've seen too many times where property or facilities people will make a presentation with lots of pretty pictures but very little factual data in it. It's not hard to put real estate into financial terms—it's really simple— but you've got to learn how to do it. Once you do it, you'll be a welcome party at the table."

After quantifying the company's property portfolio and operating expenses, the next step is to reduce costs.

Space requirements are often tackled first because that is where the greatest savings can be achieved.

"Companies need to look at their standards for property usage," Schirnig said. "What we do for our clients is quantify their growth projections and the numbers of people and space needed, then get their space down to the minimum."

In the case of leased facilities, the message is loud and clear: renegotiate an existing lease and/or consolidate into cheaper digs. Given an oversupply of space in most markets nationwide, landlords feel pressure to keep their occupancy levels high and are therefore amenable to cutting deals on rent with companies that have a good credit standing. "Companies can save as much as 20 percent on their occupancy costs," says Schirnig.

 “And in the case of owned properties, companies can get excellent prices on sale-and-leaseback transactions or outright sales, given the buoyant investment market we’re currently experiencing."

One final thing for property people to remember as they climb the corporate ladder - preparation and proactive thinking are frequently the best allies.

Says Schirnig: "The challenge for property people – whether in-house or third party suppliers - is to become a strategic partner to company directors. Effectively it’s saying, 'We’ll collect the data, evaluate the business models, do some homework and make a recommendation.' One has to be proactive about this."

ends

ISSUED FOR Old Mutual Properties

BY Michael Kerkhoff & Associates

INQUIRIES Michael Schirnig 021-530-4561

                   Mike Kerkhoff 021-424-5280