Why the costs of commercial and industrial property rentals are on the rise

Owners of commercial and industrial property around South Africa are feeling the pinch amid increases in rates, taxes and metered utility costs - and these costs are being passed on to those looking to rent these properties - and to consumers. 3Cube Property Solutions breaks down the reasons behind the burgeoning costs of commercial and industrial property rental - and provides tips to help businesses overcome this hurdle.

BusinessTech reports that the TPN Credit Bureau's Rental Monitor Report for the first quarter of 2023 reveals that municipal costs now make up a staggering 61% of total operating costs and more than 26% of the gross income generated by commercial property. This figure can be broken down as follows: 25% goes to paying rates and taxes, while another 6.7% needs to be paid for water, sewerage and effluent.

The unfortunate reality is that over and above paying increasing rates and utility bills, commercial landlords across South Africa have, in many instances, needed to resort to paying out of pocket for repairs to failing infrastructure. In order to protect both their investments and their tenants, landlords are investing in various types of infrastructure - most commonly alternative power sources to overcome the scourge of loadshedding.

Adding to these challenges is the fact that the construction sector is facing a lack of competition, as well as the compounding problem of the construction mafia. These factors lead to lower availability of new commercial and industrial properties and the age-old principle of supply and demand pushes prices up.

Compounding these issues further is the fact that thanks to inflation, households have less and less disposable income, which is necessitating the proverbial tightening of belts everywhere.

Varying rates in different parts of South Africa

For those considering setting up a new business or choosing a new location for an existing business, it is well worth noting that the Western Cape boasts the country's lowest rates and taxes for commercial, industrial and retail properties. TPN - as quoted in the BusinessTech article - quantifies this by explaining that retailers in Gauteng pay R36.87 per square metre, while their counterparts in the Western Cape pay R23.64 per square metre. This is one of the factors contributing to the Western Cape being home to the highest percentage of tenants in good standing.

Added expectations from tenants

An article published by Engineering News in 2022 details new expectations that many tenants have. Industrial companies are increasingly looking for facilities that come with features like racking, green features such as solar panels, security solutions and other supply chain components. At the same time, a golden opportunity has been presented for landlords to meet the burgeoning needs of industrial clients by converting properties into facilities equipped to help customers capitalise on the e-commerce boom.

Tips for finding affordable industrial and commercial property rentals

The first thing you need in your corner when you're looking for affordable business space is a property practitioner who understands both your business and the market. Another great tip is being slightly flexible with your location. Properties outside but adjacent to prime commercial and industrial areas are often more affordable. Other possibilities include sharing space with other businesses if this is feasible or looking at properties that might need some renovation or repair work. Working with your property practitioner, you can also negotiate terms with your prospective landlord.

If you're on the hunt for an affordable industrial, retail or commercial property in the Western Cape or Gauteng, then 3Cube Property Solutions is the perfect property partner for you. You can trust us to find your business a home that meets both its needs and your budget. Get in touch today.