Small players are blocked.

Posted On Wednesday, 13 November 2002 02:00 Published by
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THE public sector carries enormous opportunities for commercial property players, but its high barriers of entry can exclude small players, says RMB Properties services director Barend de Loor.

THE public sector carries enormous opportunities for commercial property players, but its high barriers of entry can exclude small players, says RMB Properties services director Barend de Loor.

His comments, posted in the RMB Properties quarterly review, come amid hopes that public sector work will facilitate transformation of the commercial property industry by promoting the use of smaller players in mainstream contracts.

The property industry is particularly keen on the rationalisation of the R120bn state property portfolio handled by the public works department.

RMB Properties is part of a consortium that was appointed by government to draft a public property assets rationalisation framework.

De Loor says that while public-private partnership has fuelled activity in the office development sector, the complex tender process translates to costs well in excess of the preparation costs of traditional property initiatives.

'The nature of the process requires that property developers have a significant capital base to fund the start-up phase of the project,' says De Loor.

This means that smaller players who are unable to invest in projects or unable to carry the risk of investment cannot participate in the project without help, says De Loor.

This is where joint ventures between small and established players become useful.

He says joint ventures are also facilitated by stringent tender criteria, which demand that developers show good empowerment and skills transfer credentials.

Consortiums that have secured government development work also have to deal with longer periods between the submission of a request for qualification to be selected as the preferred bidder and entering negotiations with government.

He says a consortium can wait for about 18 months before construction takes place, in comparison to a six- to ninemonth negotiating phase in traditional commercial developments.


Publisher: Business Day
Source: Business Day

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