Service separates pros from also-rans.

Posted On Monday, 25 November 2002 02:00 Published by
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Over-supply of office space demands the skills of specialists, writes Greg Gordon.
Over-supply of office space demands the skills of specialists, writes Greg Gordon

Effective management of property is the key to maximising revenues from an over-supply of commercial and office property, particularly in Gauteng.

According to Brian Kirchmann, executive director of the South African Property Owners' Association, the migration of Johannesburg firms north from the CBD to Sandton spurred a great deal of development resulting in an excess of vacant office space that is keeping property management companies busy.

'Cape Town is also a busy city in terms of development. Other centres are experiencing a quieter time,' he says.

Numerous factors influence the property cycle; interest rates being one. Recent hikes, however, have not dampened development, says Kirchmann.

'Property management takes care of the nitty-gritty details such as rentals, escalations and lease renewals, all the while striving to keep tenants and shareholders content,' he says.

Over the past 11 years, there have been significant shifts from what were once central business districts to outlying suburbs. And decentralisation is continuing.

According to a report from the JHI Real Estate Property Management Division, growth of office markets outside of the major CBDs in South Africa in the past decade has been an average 260%.

In the space of about three years, nodes such as Umhlanga, north of Durban, grew from around 63 000m² to 180 000m².

In Johannesburg, areas such as Illovo and Bryanston grew from around 24 000m² and 59 000m² in the early 1990s to over 124 000m² and 256 000m², respectively, at present.

Says Jay Junkoon, property management director for Africa at JHI Real Estate: 'Property managers are required to ascertain how best to spread resources and staff, giving consideration to economies of scale and logistics. Technology naturally plays an important role.'

He adds that Johannesburg at present faces a required take-up of more than three years in order for existing available space to be filled.

'With such higher vacancies in place, competition for tenants is strong and rental levels and escalations are severely tested. Where financially feasible, property managers attempt to secure new and existing tenants by offering various incentives and concessions,' he says.

Graham Tracey, director of facilities management company Drake & Scull, says it's the service levels that property managers offer that are likely to differentiate them in the market.

'There is an oversupply of commercial and office space and tenants' expectations are rising. Many now demand excellent support services with fast responses to their needs.

'A growing number of property owners and managers are looking to facilities management skills and expertise to provide these improved services.

'In some cases, they decide to develop their own skills, but, as in the rest of the developed world, more are outsourcing some functions to facilities services companies.

'The main reason for outsourcing is the time, cost and management focus that it requires to develop an in-house capability that can match the skills, experience and resources of a professional facilities management company,' says Tracey.

'There is a loss of focus on their core functions and conflict of interest when property managers take on the operational role of facilities services. This can be to the detriment of the tenant or building owner.'

Publisher: Sunday Times
Source: Sunday Times

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