The South African Property Owners’ Association (SAPOA) held its annual conference in Cape Town in June, where a panel of experts told the audience that there were still plenty of long-term property investment opportunities in South Africa.

Evan Robins, a listed property manager for Old Mutual Investment Group’s MacroSolutions fund emphasised the fact that property is a long-term investment in any country – not just South Africa. “The economy may be weak now, but things will improve, and growth will return," he said.

Barnaby Fletcher, a senior analyst at Control Risks, said the major risk to investing in South African property was still policy uncertainty relating to the politics of the country. “We are hopeful that Cyril Ramaphosa and his new government can quickly publicise and then implement clear policies,” he said.

Panel member Preston Mendenhall is the Executive Vice President at Rendeavour, Africa’s largest urban land developer in cities such as Kenya, Ghana, Nigeria, Zambia and the DRC. Giving a broader African perspective, Mendenhall said that these locations gave higher potential returns partly because these cities were grown from low bases, in addition to the fact that there was strong employment growth and associated infrastructure development. In comparison, he explained that South Africa simply doesn’t have projects of similar sizes.

Then, of course, there’s the network of players already in the South African property development industry including Growthpoint and Redefine, who are difficult to compete with due to their established presence.

Locally, we believe that the SARB will most likely be keeping interest rates steady due to a volatile exchange rate the on the 19th of September 19 after a .25% cut in July’s meeting. SA’s economy is expected to escape recession in the second quarter however did contract by in the first quarter of the year.

So, while the commercial real estate sector still leads the African continent, developers are having to be increasingly savvy to generate attractive returns. While the market’s maturity and sophistication compares with any developed market, investors still need to be discerning about which opportunities they take on in order to make their interests worthwhile.

SAPOA Conference: 'Plenty of long-term investment opportunities'

<a href="http://www.sapoa.org.za/media/press-releases/sapoa-disturbed-by-adoption-of-inclusionary-housing-policy/" target="_blank" rel="noopener noreferrer">The South African Property Owners’ Association (SAPOA) recently issued a press release</a> raising concerns about the <a href="https://www.joburg.org.za/documents_/Pages/Key%20Documents/policies/Draft-inclusionary-housing-policy.aspx" target="_blank" rel="noopener noreferrer">City of Johannesburg’s draft Inclusionary Housing Policy</a> that is currently being circulated for public comment.

The draft policy, which stipulates that 30% of new residential developments should be available for affordable housing, is seen by executive mayor Herman Mashaba as being an important move to address the spatial inequality associated with apartheid-era development planning.

An unworkable solution

However, SAPOA CEO Neil Gopal says that it is unworkable, and that concerns of property developments around this proposed requirement were not taken into account. “The commercial property industry is not likely to focus on housing developments in the City of Joburg as this is a very onerous policy that was not as extensively distributed for comment as the City eludes to,” he says.

According to Mashaba, the policy is meant to be financially sustainable and profitable to residential property developers, while at the same time creating affordable low-cost housing for residents. This is laid out by proposing that for every new development of ten dwelling units or more, 20% of it should consist of inclusionary housing.

Inflexible to economic conditions in South Africa

SAPOA’s concerns are that these requirements are inflexible to the underlying economic conditions and strength of the South African property market and may negatively affect the feasibility of residential developments. It’s also less than appealing for private developers looking to maximise returns on already-declining profit margins. “The revised policy is likely to have a detrimental effect on market-related housing provision in the City of Johannesburg,” says Gopal.

The draft also proposes a fixed income range for the whole city, which doesn’t take into account differing land costs across Johannesburg. “With the implementation of inclusionary housing, fixed affordability income threshold may open private developers in certain areas to revenue loss and risk,” he adds.

SAPOA's recommendations

Instead, SAPOA recommends that the city negotiate inclusionary housing provisions and incentives, rather than a mandatory approach. It also feels that the policy should be limited to selected developments, which are of a big enough scale to support inclusionary housing. The target affordability threshold should also vary according to location, and incorporate a broader income range. This, says SAPOA, will ensure smaller income differences between affordable and market units – which should minimise potential losses in revenue for private residential developers.

What we think

At Black Pepper Properties, we’re seeing that being able to successfully raise funding for any residential or commercial development projects locally is becoming increasingly challenging. Without the right policy incentives or having land certainty in place, we are going to score “own goals” when it comes to generating much-needed economic growth, jobs and redressing inequalities of the past.

Perhaps making secured, mortgage loans readily available to lower-income households should rather be a priority for policymakers, and should form part of the land reform debate? Such a policy could be highly progressive and go a long way to redistribute land and assets to previously disadvantaged South Africans.

Draft Inclusionary Housing Policy

As a commercial property brokerage, over time we were becoming increasingly aware of how important it was to find a way of automating how our business handled and managed landlord information. We realised that if we didn’t find an automated solution, we’d quickly lose our competitive edge in the cutthroat world of office and industrial property.

With this as our motivation, we started investigating software options we could use in order to do this. Luckily, business technology software is moving forward in leaps and bounds – and there are many exciting things happening in the space. As far as Black Pepper Properties was concerned, we needed a property stock system that would:
<ul>
 	<li>Be worth the time and effort integrating with our existing work processes</li>
 	<li>Meet our specific needs as a property brokerage in South Africa</li>
 	<li>Provide sufficient support and training</li>
 	<li>Provide a roadmap to eventual success using the new system</li>
</ul>
After numerous meetings and some investigation of our options, we became aware of the Gmaven Broker Platform, spearheaded by tech entrepreneur Will Harris. We became convinced that it was an excellent fit for our business – both technically and practically. Although Gmaven was a new entrant to the marketplace, we believed in the team and what they were doing, and knew that the system was technically sound and would become increasingly valuable once Gmaven attracted a wider user base.

In fact, the entire future success of Gmaven depended on how many landlords would adopt the system and send information to it: their success would be our success.

Effectively, Black Pepper was a test-bed for Gmaven, and they relied on us to give them end-user insights as to how the system should work. Using our specialist property knowledge, we were able to guide their team on adding functionality that would benefit us as property brokers – and so the market in general.

Then came the question of deciding between leasing or owning the system. If we bought outright ownership of Gmaven, we would have had an asset of several million Rands. But, with the software’s given lifespan of around five years, we would have to reinvest once this period was up. With this in mind, we decided to lease the system so that we could always have access to a cutting-edge technology that is continuously upgraded.

After we’d selected Gmaven as our preferred software provider, Black Pepper Properties as specialist advisors had several key roles:
<ul>
 	<li>To oversee the safe and efficient transfer of our database across to the new system.</li>
 	<li>To oversee the website redevelopment with an API link/switch to Gmaven, and the stock clean-up/integration of fund/private stock vacancy schedules.</li>
 	<li>To ensure the marketing material generated by the system was presented accurately, and in a format that would create a good impression with clients.</li>
</ul>
By aggregating shared information enhanced by our own layer of intellectual property, Black Pepper Properties is now able to offer a far improved offering than before. Sharing information ultimately drives economic growth due to the ability for contributors to share information with a potential financial benefit from doing so.

Of course, the transition to Gmaven was not without its problems and challenges. These included issues such as getting over the psychological adjustment of using a new system every day, and the opportunity cost of adoption versus not proceeding in implementing the system.

However, by committing to the new arrangement, learning the system, and realising the advantage of the long-term productivity gains we’d enjoy, it was more than worthwhile to take on the challenges.

As a result of the Gmaven implementation, Black Pepper now enjoys the following:

Access to current market information, which can be distributed rapidly to clients. For example, today we’re able to compile and send a property report to a prospective client in under 5 minutes, whereas before this task would have taken hours.

Access to a vacancy information feed directly into our system from the property owner or manager’s vacancy schedules. This happens within a maximum of 3 days from vacancy schedules being released, at a 98% level of data accuracy. It allows us to focus on transacting and winning new clients, with a near-complete menu of high-quality information on available space options.

The ability to easily generate and hold comprehensive information on all relevant properties within a geographical region which is now wider than we could previously cover.

Above all, adopting Gmaven has allowed us more time to reach out to property owners and tenants, as well as to manage existing client relationships. Importantly, efficiencies arising from Gmaven has allowed us to run our business more efficiently, therefore freeing us up to take the business to the next level.

Automating a property brokerage with Gmaven

So – you’re in the market for an industrial property for your company’s operations. Whether you’re looking to lease industrial premises for three or four years, or whether you’d prefer to be an owner-occupier, your choice of property has huge implications for your business in terms of productivity and financial value. In this article, we give you six reasons why it’s a good idea to use an industrial property broker to help you find your ideal premises.

1. The industrial property landscape is complicated

Securing industrial property for your business – whether you’re buying, leasing, or developing –can be complicated. For one thing, there are the specific practical aspects to consider. For example, what is the ideal location when taking into consideration staff, customers and access to transport routes? How big should the facility be under roof, and can the warehouse meet your operational requirements in the long-term? Do you have any specific loading, height or power requirements? Do you require access to gas lines or rail networks? A competent broker can facilitate these specific requirements and ensure that all options under consideration are relevant and meet your business objectives.

2. It can be expensive

Leasing an industrial property can be very expensive, often involving hundreds of thousands of Rands’ rental per month. Considerations such as lease security deposits, office fitouts, warehouse installations and acquisition of new machinery can put a significant strain on business cash-flows. A competent industrial property broker will make sure that you’re getting the best possible deal for your budget, which could positively impact the business for the many years that you’ll be occupying the property.

3. Local knowledge is key

There are many things you need to consider when choosing the location of your industrial property. Things like nearby transport nodes, market rental prices and access to staff resources, clients and suppliers all come into play. A good industrial property broker will have expert local knowledge into the industrial nodes of a city, and will better be able to find a good match for your business. It’s even more of an advantage to use an industrial property broker that is a specialist in a particular area – Black Pepper Properties, for example, specialises in industrial property in the Gauteng area.

4. You’ll get more choice

An industrial property broker is in regular communication with landlords, who will supply them with vacancy schedules that may not immediately be available to the general market. Therefore, by going with an industrial broker, you’ll be able to get a much wider choice of properties that are not necessarily in the public domain and that need to be handled with a degree of sensitivity.

5. An industrial broker is a helpful negotiation tool

An industrial property broker is useful to have when negotiating the terms you’ll agree to with your future landlord. Experienced property practitioners will know where landlords are likely to make concessions and employ effective negotiating skills to ensure that you get the best deal possible. What’s more, landlords typically prefer to deal with property brokers rather than the tenant directly, because ultimately a well-informed tenant will usually make balanced, rational motivations during negotiations which tends to result in fair, competitive outcomes for all parties.

6. Get help with future transactions

Even if you are able to “go it alone” and find your own premises, you’ll be stuck with the same time consuming (and expensive) task when you have to move again. If you use an industrial broker, you can keep a relationship with them so that when the time comes to find new premises, they’ll already be familiar with your business needs, which will give you a good head start on the process of finding a new industrial space.

Using an industrial property broker is a wise decision for many reasons, including the financial and practical aspects of finding a new property. If you recognise that you need to find industrial premises for your business, it’s a wise investment to do your due diligence and find an industrial broker who is honest and experienced, and who will broker the best possible deal for you.

6 Reasons to use an industrial property broker

When it comes to commercial property, most lease agreements have several common clauses that set out the expectations and rights of both the landlord and the tenant involved. These can go a long way to keeping the tenant/landlord relationship harmonious, and in preventing legal action and unnecessary costs on both sides. The most common lease clauses to be found in a commercial property agreement usually include the following:

1. Term of the lease

The length of a commercial lease varies, but typically in a commercial contract the lease lasts for around 3-5 years. Almost all leases will state the beneficial occupation period (one or two months), a formal lease commencement date and the expiry date of the lease period. Often a notice period of 6-12 months prior to lease expiry is included in the lease agreement, which gives both parties enough time to make provision for a new replacement lease, or to exit the existing one.

2. Use of the property by the tenant

In any commercial lease, there may be restrictions as to how a property can be used – for example, the landlord may specify that it can only be used as a commercial space rather than a residential one. Tenants should pay specific attention to the municipal zoning permissions in place which could impact on their operations within a building or property. Any contravention of the permitted by-laws could lead to fines or even a shutdown by law enforcement. Above all, ensure specific retail, office or industrial zonings applicable to your business operations are in place before committing to a lease.

3. Security deposit

Most leases include a clause about a security deposit in the form of cash or a bank guarantee that is held in favour of the landlord should the tenant breach the lease in terms of non-payment or damage to the property. In South Africa, there are strict rules for how deposits should be handled, where they are kept, and whether interest is payable to the tenant on the deposit amount. There are also often deadlines in the lease for when the deposit should be refunded to the tenant – usually this is 2-3 months after the lease has ended, when the tenant has moved out and landlord has had a reasonable period to assess the property for damage.

4. Rights to do with the possession of the property

This part of the lease will outline what the tenant’s rights are regarding the possession of the premises. Broadly speaking, the landlord is agreeing to lend the property to the tenant for their use, and possession will not be interfered with during the term of the lease. However this doesn’t mean that the landlord cannot access the premises – usually they would need to do this for repairs and maintenance, for example. The terms of access should all be clearly outlined in the lease.

5. Improvements to the leased property

In general, the tenant is not allowed to make improvements to the property to accommodate their business unless they are given express permission by the landlord, or unless there is a new agreement. If improvements are made, these will typically become the property of the landlord once the lease ends.

6. Property maintenance

How the property is maintained and who pays for it varies greatly between leases, though in most commercial leases the landlord is responsible for most maintenance. In some cases, specifically where triple-net lease is agreed, all maintenance and general upkeep of a facility will become the responsibility of the tenant. For example, a warehouse tenant could be responsible for the maintaining all air-conditioning, cranes, roller doors, dock-levellers and electrical installations, whilst the major structural maintenance and insurance would be covered by the landlord.

7. Subleasing the property

Most landlords will allow sub-leasing subject to their concluding a suitable vetting process. If the landlord permits a sublease to a third-party, he may elect to keep the original tenant liable for some or all of the remaining rental obligations thereby covering themselves for any potential risks associated with any lease reapportionment.

8. Renewal period

Many commercial leases will give the tenant the option to renew the lease before the lease period has expired. This will typically be a window within the existing lease – such as the 3-6 months prior to lease expiry – during which the tenant and landlord can negotiate a new agreement.

Overall, it’s important that both parties negotiate with a good grasp of market conditions so that equitable terms are reached for both parties.

Common Aspects of Corporate Lease Structuring

Moving to new office premises? In most cases – more than 90% of the time –changes will need to be made to your new office space to make it suitable for you as a tenant. These changes could be as minor as installing new lighting, air conditioning and a new coat of paint, to major exercises like a new interior design scheme that includes new dry walling and other major layout changes. If you’re moving to a new development, especially, workspaces will typically need to be fitted out from scratch in order to accommodate you.

So, who pays for it?

Usually, the base construction of the office premises is completed by the developer, but for the fit out, you as the tenant are responsible for this cost. In many cases, the landlord will make a contribution towards this cost – typically the equivalent of a month’s rental per year of the lease you have signed with them. Once you’ve agreed on this, a specialist interior firm will pitch to you to do your office fit out for you.

How do you choose the right office interior company?

This will depend on a variety of factors – most importantly, your budget constraints. How much money will you have to spend over and above your other moving costs and monthly rental costs? Then, you’ll need to narrow down the firm that is right for you depending on how they plan to translate your CI, whether they’ve solved for your specific workspace needs – and overall, whether you like their general interior style.

How much should you spend?

Often, the office interior firm will quote you three prices: the “Rolls Royce” option of everything including layout changes, new furniture and a completely new look and feel.

The second cost will be a mid-range one, for example where you reuse your existing furniture from your existing space.

The third option is the “bare essentials” – including things like painting, fixing flooring, installing air conditioning and laying down carpeting. Once you have these three costs, you can then prioritise over time according to your budget over the next 6-18 months.

So, with all of this in mind, if you’re a tenant looking to find new premises, what should you think about when it comes to your new office fit out?
<ol>
 	<li>What is your budget? How much money you have available to spend on your interiors will determine what kind of firm you can use and what kinds of changes you can make.</li>
 	<li>What does the floorplate look like? If you’re comparing two office premises, it’s crucial to look at the “efficiency of floorplate” of both – that is, how well the existing floorplate meets your needs and requirements, or how much will be changed. So, for example, if the existing office is better suited to an open plan space which you’d like, you’ll have to pay for less space, and so your costs will be more efficient.</li>
 	<li>What kinds of spaces will you need? You’ll need to communicate exactly what kinds of individual and collaborative spaces you’ll need to your fitout company – for example, things like reception areas, meeting rooms, boardrooms, conference facilities, how much open plan space versus private offices you want, and whether you want things like privacy booths. Bear in mind that South Africans also enjoy outside spaces as relaxation/”break” areas.</li>
</ol>
If you’re considering moving offices, the office fitout that you choose has a huge effect on your final costs, as well as the satisfaction that you and your staff will experience in your new premises.

For this reason, it’s important to know from the outset what kind of fitout you need, and to choose your interior design firm carefully so that they’ll be able to meet your needs – on time, and within your budget.

What’s involved in an office fit out?

In the South African office and industrial sectors, a property broker represents two sides of a deal: he has his client, the tenant, but he also manages the expectations of the landlord. After all, it’s in his interest for the landlord to be happy in order for the deal to go through.

But if you’re a prospective tenant looking for specialised help, a tenant representation broker may be what you’re looking for. In this article, we look at what they are, how they can help you as a tenant, and what you should bear in mind.

What is a tenant representative?

A tenant representative focuses exclusively on representing your interests as a tenant. Whether you’re a small business or a multinational looking for a new head office, a tenant representative broker will help you through all aspects of securing office premises: from helping you through the leasing process, finding suitable space, to fitting out the premises for occupancy.

Why do you need one?

Negotiating an office lease can be a complicated and expensive process. If you don’t know the ins and outs of negotiating leases or how to ask for what you want from landlords, you may end up paying well over market rates for your premises – or you may end up in a multi-year lease in a property that is completely unsuited to your needs. This is where a tenant representative can help, as they’re there to advise you on every step of the process so that you get the best deal possible.

What specific tasks do they help with?

Depending on the nature of the deal at hand, a tenant representative could assist you in the following ways:
<ul>
 	<li>Helping you to decide whether to stay in in your current premises and change them to suit your needs by renegotiating a deal with your current landlord, or move to new premises altogether
Choosing the best location depending on what you specifically need as a business – e.g. proximity to major highways or public transport hubs, a certain size of premises, or needing to be near your bigger clients</li>
 	<li>Negotiating the best deal possible with the landlord for new premises</li>
 	<li>Helping you to temporarily sublet space if you buy premises with the view to expanding in future</li>
 	<li>Advising you on all aspects related to leasing commercial premises</li>
 	<li>Helping you with a new office space fit out by connecting you with specialist partners in this area</li>
</ul>
What should you look out for?

If you’re looking for a party that looks out specifically for your interests, a tenant representative is crucial to have during your commercial property negotiation. If you’re trying to find one, what should you look out for? First and foremost, your tenant representative should have a good grasp of the market, strong ethics and proven track record.

Tenant Representation

By the very nature of the job as a property broker, there are conflicts of interests that arise during any property transaction. After all, the property broker is a kind of “double agent”: he’s there to ensure the best interests of his client – the tenant – but he also needs to ensure that the other party in the deal – the landlord – is getting a good enough deal in order for it to be successful.

While this is not a problem when the deal is going well, if things go south, and the property broker’s interests start conflicting with those of the client or the landlord, it can be problematic. These interests could relate to a personal conflict, financial standings, shareholdings or a role in the company looking for commercial space or within the company leasing it.

There may also be direct interests, where the agent is offered a direct benefit (whether financial or otherwise) to have a deal sway a particular way. As an illustration, here are some examples where a conflict of interest may arise between the property broker and the client or landlord:

Direct conflicts of interest
<ul>
 	<li>The broker personally buys, leases or takes an option on a commercial property that they are advertising to let or sell</li>
 	<li>The broker receives monetary bonuses, shares, holidays, discounts or dividends from a company that the broker recommends to
his clients</li>
</ul>
Indirect conflicts of interest
<ul>
 	<li>The broker helps an employee, friend or business associate to take an interest in a particular property they are listing</li>
 	<li>The broker recommends a service provider to a client that is affiliated in some way with the broker’s relative, friend, or business associate</li>
</ul>
According to guidelines set out by the Royal Institute of Chartered Surveyors (RICS), the most important reason to avoid a conflict of interest is to prevent anything affecting your duty advise and represent each client objectively and independently, so that the client (and the public) can be confident you’re doing so without your own personal interests affecting your judgement. RICS Rules of Conduct set an overarching obligation on both members and RICS regulated firms at all times to “…act with integrity and avoid conflicts of interest and avoid any actions or situations that are inconsistent with its professional obligations.”

So, if there is a potential conflict of interest with a property agent, whether directly or indirectly, there are several things they should do.

Disclosure

If there is a potential conflict of interest, it is always ethical for the broker to disclose their affiliations to both the client and the landlord.

Conflicts of interest as a property broker

At the end of May, the SA Reserve Bank confirmed that it was keeping the repo rate steady at 6,75%, which meant that the prime lending rate would stay at 10,25%. While this conservative approach was taken to counter inflation, if the repo rate had been reduced, this may have provided some relief from our protracted, sluggish economy – which may well have improved prospects for our office and industrial property sectors as well.

While this hasn’t happened, industry analysts across the commercial property sector are saying that the downward correction of office and warehouse rentals may still continue for the foreseeable future. In contrast, there are those who predict a turnaround of the housing market on the back of the May elections, since this was the case after all five general elections previously held.

If this does happen, the industrial and residential market should start to strengthen, which is usually followed by the office sector.

National property REIT Redefine Properties reported its half-year results at the beginning of May, including average rental reversion rate of -6%, with a figure of -17% for industrial properties over the previous six months. A rental reversion rate reflects whether leases up for expiry that have been renewed in the last half a year had higher or lower rental rates than before. This negative reversion rate confirms that lower rental rates are now being negotiated compared to before. This sends a negative signal to other landlords across South Africa, whose leases may soon be up for renewal, as they may not be able to charge as much as they have before.

According to Redefine, the contributing factors for this negative percentage were low business confidence, larger vacancy rates, and higher rates and electricity prices. When added together, these are putting pressure on lease escalations.

So for the commercial and residential markets combined, the outlook is currently less than positive. At Black Pepper Properties, we feel that in this current climate, tenants have a great opportunity to capitalise on soft rentals and aggressive landlord incentives by locking in attractive terms for the long term.

Corporate real estate outlook: what the rest of 2019 holds

Ethics are the moral barrier that separate a property professional from other people in the market place. No matter where they are in the world, if a property professional is RICS affiliated, they show commitment to ethical behaviour by keeping to five professional and ethical standards.



1. Act with integrity



This is about being honest and straightforward in the way that they work, which includes things like sharing key information with their clients, respecting their privacy, not taking advantage of a client, and not allowing bias to override their professional judgement. If there is a potential conflict of interest, the agent should disclose this at the outset. They should also act consistently in the public interest when it comes to giving advice. 



2. Always provide a high standard of service



A RICS affiliated agent should always make sure that their clients receive the best possible advice and support. This means being clear about the service they are providing and what the client expects from them – if this is above and beyond their scope of competence, they should explain that they’re not the best fit for the client. 



This also means that the agent should be transparent about fees and any other costs or payments such as referral fees or commissions. They should also communicate with the client properly, and to pay for the services of others within agreed timeframes. 



3. Act in a way that promotes trust in the profession



The agent should always act in a way that promotes them and their firm in a positive, professional way. Overall, this is about understanding that being a professional is not just about how an agent acts at work: it’s also about how they conduct themselves in their private life. They should also understand how their actions affect others and the environment, and they should always do what they say they will in order to fulfil their obligations. Finally, they should aim to meet the true spirit of professional standards – not just pay lip service to it. 



4. Treat others with respect



A RICS-affiliated property agent should treat everyone they deal with in a polite, courteous and respectful way that also considers cultural sensitivities as well as best business practices. This means never discriminating against anyone for any reason: issues of race, gender, sexual orientation, age, size, religion, country of origin or disability have no bearing on how they deal with people or conduct business. 



5. Take responsibility



An ethical agent should always be accountable for their actions: they shouldn’t blame others if something goes wrong, and if they suspect something isn’t being done ethically, they should be prepared to take action. 



Taking responsibility also means acting with skill, care and diligence. If an agent has a complaint against them, they should respond appropriately and professionally, and should aim to resolve the conflict as fairly as possible. 



If the agent thinks something is not right, they should be prepared to question it and raise the matter with their colleagues or organisation. Alternatively, they should raise the matter with RICS or any other appropriate body.

Ethics - and what they mean in the property industry

When it comes to premium-end, flexible office space, we’re definitely in the golden age. As organisations change the way they view staff, productivity and business, there’s an increasing trend towards office space that’s as flexible as possible.
In terms of the physical space itself, this equates to things like reducing fixed-term office commitments and layout configurations, providing generous shared spaces for collaboration, hot desking, and access to use fully-kitted meeting and boardrooms. But this trend towards flexibility doesn’t just end there – it’s also showing in the way tenants view their commitment to office leases. In short: they don’t want to be tied down into traditional 3-5 year leases.
Enter companies like WeWork, the US flexible office space start-up that was recently valued at $47 billion. Just like Uber in the transport sector and Airbnb in the travel sector, WeWork is a disruptor in the commercial office space industry, working via an entirely non-traditional business model where they don’t own any buildings. Instead, they take on JVs with landlords, and then run the space on their behalf.
Essentially, WeWork is a global membership offering very flexible lease terms (you can rent month-to-month if you prefer), and the ability to add or take away desks as required. There are also a host of “trendy” perks – including things like free breakfasts, fitness classes, talks and mentorship programmes. Their focus is community, so they aim to foster an environment of collaboration between businesses within their space.
With presences established in many other countries around the globe, WeWork has now set its sights on South Africa, with the first space due to open in the Rosebank CBD on 1 August. The P-grade premises on Oxford Road will be leased from listed REIT, Redefine Properties, to become WeWork’s flagship location in the country. “Johannesburg is home to a huge number of innovative and established businesses as well as entrepreneurs and start-up’s, and we’re looking forward to learning from those who join our community of 400,000 members across 400 locations around the world,” says Eugen Miropolski, WeWork International’s Managing Director.
In terms of its competitors, WeWork definitely presents a threat to SA’s current office leasing market, who in contrast to most landlords and property managers, are wholly focused on the customer experience. So, unlike conventional office tenants, WeWork members never have to worry about any unbudgeted costs for things like utilities, Wi-Fi, security, cleaning, coffee, tea, health juices, printing, reception services and mail handling. With the free use of attractive communal spaces that include phonebooths, wellness rooms and outside patio areas, it’s fair to say that no stone has been left unturned when it comes to occupant expectations.
WeWork’s significant global footprint gives them a major competitive edge to local suited office operators. With a WeWork membership card in hand, you could book a meeting in London or New York tomorrow at any of their offices – which makes doing business internationally completely accessible, and cheaper than ever.
Another possible disadvantage for WeWork’s competitors is that they’re unlikely to be able to compete on price. Most serviced office companies in South Africa have traditional leases with landlords, which means their prices are already set and will be hard to bring down to compete with WeWork’s, whose well-known business strategy is to be a loss leader in order to gain geographical footprint.
Whatever happens, WeWork’s arrival is set to shake things up in the serviced and traditional office sectors.


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Office Space Disruptor WeWork Heads To South Africa

Johannesburg offers an abundance of office space in almost every area - from Parktown to Waterfall, to Fourways, and all the way through to Pretoria. There's space to suit almost every budget and size, from small start ups of a few people requiring a few square metres, to large corporates needing an entire building for their hundreds or even thousands of employees. In areas like Sandton, Fourways, Rosebank and Waterfall, there are many new, attractive developments underway providing ample space for any requirement.
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Here are our featured Gauteng commercial properties:

<a href="https://www.blackpepperonline.co.za/properties/property/to-let/office/rosebank-gp/144-oxford-road-office-property-to-let-in-rosebank-gp/546c206c-4f42-4a2f-a0fa-07e293ae49cd" target="_blank" rel="noopener noreferrer">144 Oxford Road, Rosebank </a>

144 Oxford Road in Rosebank is a 36,000m2 mixed-use precinct including office and hotel accommodation. The development offers unparalleled exposure onto Oxford Road, diagonally opposite the Hyatt Hotel, truly the gateway site into Rosebank. The office buildings will attract a minimum 4 Star Green Rating and the floor plate design will allow for individual brand identities per floor. Amenities include hotels, restaurants, shops, gyms and schools.

<a href="https://www.blackpepperonline.co.za/properties/property/to-let/office/sandton/the-marc-office-property-to-let-in-sandton/e643ffa8-00ec-4cb5-adbf-092602033377" target="_blank" rel="noopener noreferrer">The Marc, Sandton</a>

The MARC is ideally located in the heart of the financial district of South Africa, home to the JSE Securities Exchange, an array of investment banks and financial consultant giants. Sandton serves as South Africa's premier business and conference centre boasting 5-star luxury hotels and premier facilities and shopping destinations.

<a href="https://www.blackpepperonline.co.za/properties/property/to-let/office/glenadrienne/sandton-gate-office-property-to-let-in-glenadrienne/30441e13-3737-4895-844f-1446a8f9cf1b" target="_blank" rel="noopener noreferrer">Sandton Gate, Sandton</a> 

Sandton Gate is destined to be a world-class, mixed-use precinct, offering a lifestyle we're all aspiring to: city living with all the benefits of suburban life. The precinct overlooks the Braamfontein Spruit, one of Johannesburg's longest natural greenbelts, while being on the doorstep of South Africa's financial CBD. Less traffic, better business and all round smarter living.

<a href="https://www.blackpepperonline.co.za/properties/property/to-let/office/waterfall-business-park/gateway-west-office-property-to-let-in-waterfall-business-park/cb495024-3385-4827-85cc-f9f62a5adabf" target="_blank" rel="noopener noreferrer">Gateway West, Waterfall Commercial Estate</a>

The two Gateway Office buildings are situated on one of the most prominent sites in Waterfall City at the entrance from Allandale Road and the Northern entrance of the Mall of Africa. The central piazza between the buildings is designed to be a corporate square and urban green open space for the building is ideal for informal discussions or lunch breaks.

Looking for office space somewhere specific in Gauteng? Browse <a href="https://www.blackpepperonline.co.za/search?sortBy=ToLet&amp;refinementList%5Bcategory%5D%5B0%5D=Office&amp;refinementList%5Bsuburb%5D=&amp;refinementList%5Bcluster%5D%5B0%5D=Sandton%20and%20surrounds&amp;refinementList%5Bcluster%5D%5B1%5D=Rosebank%20and%20surrounds&amp;refinementList%5Bcluster%5D%5B2%5D=Rivonia%20and%20surrounds&amp;refinementList%5Bcluster%5D%5B3%5D=Midrand%20and%20surrounds&amp;refinementList%5Bcluster%5D%5B4%5D=Fourways%20and%20surrounds&amp;refinementList%5Bcluster%5D%5B5%5D=Bryanston%20and%20surrounds&amp;refinementList%5Bcluster%5D%5B6%5D=Parktown%20and%20surrounds&amp;page=1">more of our Johannesburg commercial properties now</a>. Or, call Simon on 083 261 2861.

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Johannesburg Office Space

Johannesburg offers a huge range of choices when it comes to industrial property. The choice of where to base your warehouse or industrial business depends on several logistical factors: how close you want to be to OR Tambo, for example, or how close you need to be to highways like the N3, R12, R24 and the N1. Pricing is hugely variable depending on area: industrial land in the east, for example, is competitive due to the fact that there is so much stock available here compared to other land pockets in Gauteng.

Here are our featured industrial properties:

<a href="https://www.blackpepperonline.co.za/properties/property/to-let/industrial/plumbago-business-park/plumbago-logistics-park-industrial-property-to-let-in-plumbago-business-park/0d404477-4673-4290-947b-419cb810ffdf" target="_blank" rel="noopener noreferrer">Plumbago Business and Logistics Park</a>

These are two precincts of land, straddling the R21 which have been acquired to create an exciting logistics hub strategically located in close proximity to OR Tambo International Airport, east of Johannesburg.

The precinct will house both large and small distribution users the immense benefit of convenient access to all major freeway routes serving Gauteng and beyond.

<a href="https://www.blackpepperonline.co.za/properties/property/to-let/industrial/waterfall-city/k101-warehouse-industrial-property-to-let-in-waterfall-city/1a27f38a-d558-425e-954a-01e64a5a85bd" target="_blank" rel="noopener noreferrer">K101 Warehouse, Waterfall Estate</a>

K101 is a speculative development in the heart of Waterfall City. The property enjoys great exposure to the K101 and offer convenient access to the N1 highway North &amp; South. Waterfall City is rapidly becoming an iconic lifestyle city with a comprehensive mixed-use offering.

<a href="https://www.blackpepperonline.co.za/search?sortBy=ToLet&amp;refinementList%5Bcategory%5D=Industrial&amp;refinementList%5BsuburbCluster%5D=Lords%20View">Lord's View Industrial Estate </a>

In addition to greenfield opportunities, there are existing facilities available to lease. The site offers ample staff and truck parking with ability to reticulate around the site. Rental will depend on lease term and covenant although we will offer competitive pricing.

<a href="https://www.blackpepperonline.co.za/properties/property/to-let/industrial/gosforth-park/gosforth-business-park-industrial-property-to-let-in-gosforth-park/9f9abbcb-a9b3-47db-9dbd-b7da527c993f" target="_blank" rel="noopener noreferrer">Gosforth Park Industrial Estate</a>

There are two new industrial units at the successful Gosforth Business Park. The location is ideal for distribution warehouses with easy access to the junction of the N3, N12 and N17 highways.

Construction will commence on Portion 4 shortly, which fronts on to the N3/N12 highway, consisting of a warehouse with offices on 2 floors and a separate gatehouse. The building can be tailored to meet specific tenant requirements.

Its central location also  means excellent access to OR Tambo International Airport, the Greenstone retail precinct and public transport including the Gautrain.

<a href="https://www.blackpepperonline.co.za/properties/property/to-let/industrial/germiston/sandj-industrial-park-industrial-property-to-let-in-germiston/2c6bb9eb-829d-4982-8581-c8b1b136819c" target="_blank" rel="noopener noreferrer">S&amp;J Industrial Park</a>

Situated in Germiston on the M2 with N3 freeway frontage, S&amp; J industrial park offers excellent visibility and direct access from the highway making it ideal for logistics, manufacturing, warehousing and distribution. Stands to accommodate units from 5000m² to 100 000m² plus are available for development to suit tenant requirements, or on a turnkey basis.

Looking for land elsewhere in Gauteng? Browse <a href="https://www.blackpepperonline.co.za/search?sortBy=ToLet&amp;refinementList%5Bcategory%5D%5B0%5D=Industrial&amp;refinementList%5Bsuburb%5D=&amp;refinementList%5Bcluster%5D=&amp;page=16">more of our industrial properties now</a>. Or, call Simon on 083 261 2861.

Johannesburg Industrial Property

With the advancement of online content that's more reliable and accurate than ever, commercial property tenants are becoming more educated, switched-on and discerning as consumers of corporate real estate services than ever before.
Useful online tools.
In an age of TripAdvisor, Kayak, Zomato and Tinder, consumers expect access to better-quality decision self-serving information, early. Commercial property’s response is the widespread availability of useful online tools that allow potential tenants to conduct their own market research, before formally engaging with a property broker. For example, many property websites now offer comparable (like for like) property information in the same area, with detailed stats to go along with it. This allows potential customers to first get comfortable with the various property transaction mechanics, while at the same time avoiding the pressure often applied by agents during initial engagements.
“Almost live” data
Another factor in this tech disruption is the increasing availability of “near real time” data that is now available to customers directly from landlords. We, for example, receive a feed of aggregated industry data from property software platform Gmaven. This means that the property information on the website from the major listed/private sector property funds is highly relevant and up to date.
So where do property brokers fit in?
With all this data now available directly to commercial and industrial property customers though, how do property brokers fit into this new landscape – and is there even place for them?
In our opinion, the disintermediation of commercial and industrial property agencies won’t happen due to the complexities involved with commercial property transactions. In these transactions, tenants and buyers both benefit, because they both get near-perfect market information.
In fact, the technology can actually help property brokers – not hinder them. As agents, we used to be delayed in servicing client enquiries due to collating and analysing data.
One potential adverse reaction to this new tech adoption is the increasing trend among some property agencies to publish ‘window-dressed’ website listings that don’t actually exist or where their information cannot be trusted. These marketing tactics create the impression of ‘below market’ listings or the provision of fake stock to lure tenants and later claim a property has “just been let or sold – but can we offer you an alternative?”. The dangers of agencies doing this is that they lose the trust of the customer for future transactions – if they manage to retain them that long at all.
It benefits landlords too
The adoption of more sophisticated tech platforms by property brokers for their customers is also a good thing for landlords, as it allows property owners the ability to control the quality of their information available to potential customers. This “one version of truth” solution significantly reduces the pen-and-paper, phone tag churn required to confirm financial information between all parties.
Up until now, property fund listings online are typically littered with poor, inaccurate or limited information. This unmeasured, almost slap-dash approach doesn’t allow a potential tenant to make a firm decision, and this doesn’t reflect well on the landlord at all. Streamlining this with tech improvements will go a long way to ensuring control of outgoing vacancy information to market both in terms of accuracy and quality – which ultimately means more deals for the landlords.
Property funds are also increasingly adopting these technologies to increase the chances of direct client engagements, while sidelining agencies and thereby avoiding having to pay sizeable commissions.
In a South African context, the benefits of a tenant dealing directly with landlords remain fairly limited. In most cases, a tenant doesn’t have access to data like market trends and likely landlord concessions. They also lack experience in the industry and so have to rely on often-conflicted advice to navigate through complex decisions towards a satisfactory financial outcome. This is now changing: tech advancements do allow significantly more research to happen prior to formal engagement with a broker.
An industry switch
By employing an industry switch as seen with the banks and the medical industry, property industry data can flow in several directions, from property funds into property agencies and then in turn from agency websites to customers. This requires the aggregation of information to comparable formats, where data is standardised and displayed in decision-relevant ways. Commercial terms and information also need to be presented in a way that can inform, educate and empower.
Once this is perfected, property brokers can concentrate on increasing deal flows, interpreting the data, advising clients and providing a more intimate and consistent property needs-driven pre-engagement with tenants. In this way, agencies are evolving from mere “dot joiners” to providing valuable consulting services in commercial property transactions – which ultimately benefits both tenants and landlords alike.

BizTrends 2019: How tech is disrupting - and benefitting - the corporate real estate industry

SAPOA is concerned over the lack of feedback from the City of Johannesburg on the latest General Valuation (GV) Process. In correspondence to the City Manager, SAPOA has highlighted the legal position on three key factors affecting the valuation roll:
<ul>
 	<li>Ratepayers are not liable to pay disputed rates pending the outcome of objections or appeals.</li>
 	<li>The City is not entitled to cut off services such as electricity if ratepayers fail to pay that portion of their rates which they are disputing,&nbsp; nor may it threaten to do so.</li>
 	<li>The City is not entitled to claim interest on any shortfall on rates payable by ratepayers on finalisation of objections or appeals.</li>
</ul>
<div>On the question of ratepayers not being liable to pay disputed rates the City refers on its website to Section 50(6) of the LOCAL GOVERNMENT: MUNICIPAL PROPERTY RATES ACT 6 OF 2004 (“MPRA”) and concludes as follows :&nbsp;“Therefore the account must still be paid until the objection process has been finalised.”&nbsp; The City in fact insists that the full amount of rates billed must be paid, including any disputed amount.&nbsp; SAPOA has pointed out that this interpretation is incorrect.&nbsp; In addition it is significant to note that the City of Cape Town reached a different conclusion. In a circular released as part of its GV 2015, it posed the following frequently asked question: "Do I still need to pay the new rates if I disagree with the value and my objection is still unresolved?"&nbsp;It then supplied the following answer:&nbsp;"You will need to pay rates until the objection is resolved. The rates need not be based on the new valuation but must at least resemble the amount you are currently paying. "</div>
<div></div>
<div>On the question of the City being entitled to cut off services such as electricity if ratepayers fail to pay disputed rates,&nbsp; Section 102(2) of the Systems Act clearly states that municipalities are prohibited from terminating municipal services in relation to amounts under dispute.</div>
<div></div>
<div>On the question of the City being entitled to claim interest on any shortfall on rates payable by ratepayers on finalisation of objections or appeals, the City misquotes the relevant provision of the MPRA, namely section 55(2). That section, in fact, provides in 55(2)(b)(i) that where there is a shortfall payable by the ratepayer, the municipality “must” recover the shortfall from the ratepayer “without&nbsp;adding interest” thereon. It is only when the municipality is required to refund surplus rates paid by the ratepayer that interest must be added.</div>
<div></div>
<div>It is SAPOA’s understanding that, in previous valuation exercises, the City did not follow the correct practices and the indications are that the City does not intend to do so with the current valuation process.&nbsp; SAPOA has asked the City to provide it with an assurance that it will ensure its practices pertaining to the 2018 GV will in fact align with the legal requirements set out above. To date there has been no feedback from the City of Joburg.</div>
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Should the City transgress the MPRA, SAPOA intends approaching the courts.&nbsp;Johannesburg property owners have until today (Friday 6 April) at 15:00 to object their property valuations and can supply comments on until 22 April 2018.&nbsp; The new values and tariffs will be introduced from 1 July 2018.

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CoJ's General Valuation Process for Objections and Appeals

EXCLUSIVITY CLAUSES - COMPLAINT BY MASSMART

On 11 June 2015, Massmart referred its complaint against Shoprite, Pick 'n Pay and Spar to the Competition Tribunal following the Commission's decision to 'non-refer' the matter due to the Grocery Retail Sector Market Inquiry. SAPOA has been cited as fourth respondent in the proceedings. Massmart states that SAPOA is cited in the complaint merely for the 'interest' that it and its members have in the matter. Importantly, no relief is sought against SAPOA or any of its members. However, if Massmart is successful in its complaint, SAPOA’s members may well be affected in respect of new lease agreements which are to be negotiated or concluded and existing lease agreements which contain exclusivity provisions.

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Interlocutory procedural applications 

Exception Applications – Shoprite, Spar and Pick ‘n Pay During August 2015, Shoprite, Spar and Pick ‘n Pay each filed a pleading known as an ‘exception’ to the Massmart complaint. The exceptions set out argument as to why the substance of the complaint referral to the Tribunal by Massmart does not meet the strict procedural and content requirements to allow the respondents to deal with the complaint. In summary, Shoprite, Spar and Pick ‘n Pay have asked that the Tribunal throw out the complaint, alternatively to direct that the points raised of defective pleading must be remedied by Massmart before the matter proceeds further. In a combined answer to all three exceptions, filed on 16 September 2015, Massmart contends that the exceptions are in respect of matters of particularity and detail, and it is not required or appropriate to decide these issues at this stage of the proceedings. The Tribunal will ultimately decide whether the complaint referral meets the requirements of particularity and detail required by the Competition Act, and/or stipulate what further is required in order for the respondents to answer the case before them.

Stay Application – Spar 

On 21 December 2015, Spar filed an application to stay proceedings. The relief sought by Spar is to stay (suspend) the Massmart complaint proceedings pending finalisation of the Grocery Retail Sector Market Inquiry. Spar argues that allowing the Massmart complaint to proceed will result in parallel investigations into the same substantial issues by the Competition Tribunal and the Commission’s assigned Market Inquiry team. This, Spar suggests, is not in the interests of the principle of institutional comity between the Tribunal and the Commission – this principle can be described as a restraint exercised by one institution out of respect for the role of another.

Spar also suggests that there is no indication that the Massmart complaint will be finally resolved before the Market Inquiry is due to be completed – by May 2017. Although the Tribunal has not previously been asked to stay proceedings pending conclusion of a market inquiry, it has accepted that it has the power to stay complaint referrals before it.

The Tribunal has and will exercise a general discretion in deciding whether or not to grant this application. If the complaint is stayed pending the Market Inquiry, Massmart’s rights to proceed will simply be postponed pending the outcome of the Market Inquiry in the same way as SAPOA has agreed to suspend its rights in terms of the SAPOA complaint.

SAPOA’s role in proceedings. 

For now, SAPOA has elected to simply take a passive role in the proceedings. It may later choose to make a submission to assist the Tribunal and it may be called upon by the parties to provide information and possibly give evidence on these issues. Fasken Martineau's brief is to monitor proceedings and communicate developments which may have an impact upon SAPOA and its members.

The hearings are set down for the 26th and the 27th July 2016.

Copyright © 2016 SAPOA, All rights reserved. SAPOA

Massmart Complaint

The Sandton Central Business District (CBD) will become Africa’s only car-free CBD for the month of October as large sections of the roads will be closed off and focused on cycling and pedestrian activities such as pop-up restaurants, entertainment stands and food stalls.
The City of Joburg is the host of the EcoMobility World festival 2015, which aims to showcase that the urban eco mobile lifestyle can be implemented in cities across the world. The festival, which takes place over South Africa’s Transport Month, is the City of Joburg’s endeavour to encourage the use of public transport, cycling and walking as alternative modes of transport.

Activities to encourage healthy living like aerobics and daily walks will also take place in selected areas.&nbsp;City of Joburg Executive Mayor, Parks Tau outlined the concept behind the festival at the Sandton Sun Hotel in Sandton during a breakfast event held in conjunction with the South African Property Owners Association (SAPOA) on 28 May 2015. The Sandton Central Business District (CBD), the second busiest in the City of Joburg, is the host of the international event which will temporarily transform the CBD into an urban EcoMobility neighbourhood featuring selected road closures, park and ride facilities, increased pedestrian activity as well as a more intense usage of public transport.
Neil Gopal, Chief Executive Officer of SAPOA supports the City in its efforts as he recognises the gridlocking and traffic congestion in Sandton. “Whilst we are concerned about the operational issues of the functioning of retail facilities in Sandton and the resultant impact on shopping centres, we are working with the City on these issues,” says Gopal. “I call on other CEO’s to join the mayor in this important endeavour to change people’s behavioural patterns.”The first EcoMobility festival was organised in 2013 by the City of Suwon, South Korea and it attracted over one million visitors and this year’s event is also expected to attract a large number of visitors. The primary objective of the festival is to enable behavioural change from private car use towards other transport and as such drivers visiting and working in the CBD will be provided with park and ride facilities.In this year’s instalment of the festival will showcase the Rea Vaya Rapid Bus Transit system and Metro buses as alternative modes of transport, promote Joburg as a cycle friendly city, show and promote non-motorised and alternatively powered vehicles, promote walking and show the benefits of reduced congestion on productivity, quality of life and emission standards.
The month long festival will have different components such as legacy projects, EcoMobility dialogues as well as street festivals and events.A transport management plan has been adopted by the City of Joburg to encourage the CBD’s users to participate in the festival. During the period of the festival, additional public transport in the form of the Gautrain which will be travelling at 10 minute frequencies, increased availability of Metro busses, providing accredited mini bus taxis, tuk tuks, pedi cabs and electric vehicles will be accessible to commuters.
The festival is not only expected to gear vehicle users’ minds closer to considering alternative means of commuting but to also significantly alter the travelling routine of the daily Sandton CBD commuter.

Sandton CBD Car Free Zone

Commercial property rates and taxes – a comparison across South Africa’s eight metropolitan municipalities.&nbsp;The South African Property Owners Association’s (SAPOA) comparison of the level of rates and taxes levied in each of the eight metropolitan municipalities reveals some variance in the cents in the rand rate across the main property types.

The latest rates and taxes research from SAPOA highlights the huge disparity between the country’s major cities in terms of the resources available to deal effectively with ongoing urbanisation, poverty, unemployment and inequality. Within the context of the National Development Plan’s emphasis on the major cities being the engines of economic growth, these disparities and the shortcomings they reveal, need to be addressed as a matter of urgency.

The research also confirms that over the last decade, rates and taxes have consistently increased at a rate higher than inflation with a rates and taxes annualised rate of inflation of +8.2% over the period of 2005 – 2014.&nbsp;Although prior to this, the increase in rates and taxes exceeded inflation, the acceleration in growth rate has been more noticeable since 2005.

From solely a rates randage perspective, for the fiscal year of 2014/2015, the highest level of commercial property rate randage was levied in the eThekwini Municipality where a rate of 3.053 cents in the rand applied to industrial property. Commercial and business property saw a slightly lower tariff of 2.36 cents in the rand being applied.

The City of Tshwane reported the second highest cents in the rand rate with industrial and business property both taxed at 2.71. The lowest rates applied to the City of Cape Town with both industrial and commercial property taxed at 1.25 cents in the rand.

The largest municipality in terms of revenue, the City of Joburg, applied a rate of 1.73 cents in the rand while Nelson Mandela Bay, Buffalo City and Mangaung, the three smaller metros had comparatively high commercial property rate randages.

It is noted however that the rate randages do not necessarily result in higher property rates as this is predominantly affected by the actual property value. The case of the eThekwini Municipality is therefore instructive.

Whilst the eThekwini Municipality’s rate randages come out as the highest, the number of rateable properties is more than 60% less than both Cape Town and Johannesburg and the value of commercial and industrial properties is more than half that of Johannesburg and nearly half that of Cape Town.

This can be seen with eThekwini having the least quantum of rates revenue of the 3 major cities. Furthermore, within eThekwini, more than 90% of the total rateable property is residential resulting in a major challenge for the municipality.

The nett effect is therefore a higher rate randage than in the other major cities, but not necessarily higher property rates. Certainly however, within every municipality, rates revenue is a critical source of revenue and within eThekwini, its huge challenges force it to rely heavily on such revenue.

Presenting the highlights of the city’s budget, eThekwini Municipality Mayor, James Nxumalo, said a large portion of the Municipality’s R6.1 billion capital budget will be pumped into low-cost housing and infrastructure development throughout the City towards creating an enabling environment for new investments and other activities that lead to job creation.

Mayor Nxumalo confirmed the city’s commitment to building a sustainable City for future generations based on infrastructure-led growth, unlocking investment, economic development and job creation. Investments include more than 65 flagship projects across the city ranging from manufacturing, construction, real estate, tourism, information communication technology, agriculture, maritime and logistics. The projects are expected to create about 680 000 permanent jobs in the long-term and the potential revenue of about R 9 billion for the city.

The Municipality has established a project management office whose main role is the facilitation of the implementation of catalytic projects such as the inner city renewal in addition building capacity.
Nxumalo said that in drafting the tariff increases, the City took cognisance of economic conditions, input costs and the affordability of services to ensure the financial sustainability of the city.

Rates and taxes form a significant percentage of overall municipal revenues with the eight metro municipalities collecting R29bn in rates and taxes, 17.9% of total revenue.
During the 2013/2014 fiscal, commercial and industrial property rates billings amounted to 54.5% of overall rates revenue in the country’s metropolitan municipalities with significantly lower levels of arrears than commercial clients.

Of the 8 metro municipalities, 6 reported increases of 30% + in the value of commercial and industrial properties. Mangaung reported the largest increase with the valuation of its commercial property almost increasing while eThekwini reported a municipal valuation increase of 50%. Tshwane and Buffalo city were the only municipalities with a valuation increase close to inflation with 5.6% and 4.7 respectively.

In conclusion, the increase in rates and taxes comes at a much tougher macroeconomic environment with economic growth currently at levels of around half of that of the period 2004-2007. As a result of this tougher trading environment, it is becoming increasingly challenging for landlords to deal with the additional tax burden.

Commercial Property Rates & Taxes

ANVA PROPERTIES CC V END STREET ENTERTAINMENT ENTERPRISES CC
Landlords are always looking for legal ways to disconnect the electricity supply to the tenant not paying for electricity consumption charges.
On 14 April 2015, the Western Cape High Court in&nbsp; Anva Properties CC v End Street Entertainment Enterprises CC (Anva), granted a judgment in favour of Anva Properties CC (Landlord) and held that the Landlord was authorised to terminate the supply of the electricity to the premises occupied by End Street Entertainment&nbsp; Enterprises CC (Tenant).

In brief, the facts&nbsp; of the Anva case are as follows:
The Landlord owned a building in Riebeeck Street, Cape Town and the Tenant was one of the tenants in occupation of the building. The Landlord paid its electricity consumption charges for the building to the City of Cape Town (City) and recovered the costs from the tenants. The Tenant had occupied the basement of the building since 2012, from where it conducted its business as a bar and nightclub.&nbsp; The Tenant used electricity for its air-conditioning, refrigeration and lighting facilities and the Tenant had not paid its electricity bill since September 2014 and was in arrears in excess of R300 000. The Landlord was required to pay the City for all services rendered in the building including electricity and if the Landlord did not pay the City for its electricity, the City would cut the supply to the building, which would cause other tenants in the building to be without electricity. The effect of this was that the Landlord was subsidizing the Tenant’s business.
The Judge held that the&nbsp; Landlord was authorised to terminate the supply of electricity to the premises that the Tenant occupied and granted an order that the Tenant must give the electrician, appointed by the Landlord, access to the premises in order to disconnect the electricity supply to the premises.
&nbsp;The Anva case&nbsp; is of particular interest to landlords as landlords are always seeking ways to lawfully terminate the supply of electricity to non-paying tenants. On reading this case, the first impression that is created is that this case may be ground breaking. However, on closer consideration of this case, it is clear that this case does not allow the landlord to terminate the supply of electricity without a court order. The principle emanating from this case is that if a landlord is supplying electricity to a non-paying tenant, the landlord may apply to court for an order to disconnect the supply. In the Anva case, it was an easy decision for the court to make as it was common cause that the Tenant had not paid for the electricity charges and the Tenant did not dispute the charges.&nbsp;
The Anva case does not give landlords the right to take the law into their own hands and to terminate the supply of electricity to non-paying tenants without a court order.

Tenant not paying for electricity consumption charges

Relocating commercial premises is hard on a business. Moving location, no matter how near or far, can disrupt your operations, put strain on customer relations, and be unsettling to your staff.

In order to make your commercial move as seamless as possible, here are three&nbsp;important steps you can take:


<ol>
 	<li>Develop a transition strategy. From the moment you know you're going to move, identify the business issues or challenges that will go along with it, as well as ways to deal with each one.</li>
 	<li>Prioritise. Plan on which issues you'll deal with first, and identify any relocation constraints you'll be faced with.</li>
 	<li>Communicate. Throughout this process,&nbsp;ensure that your staff remain informed of all moving plans and schedules as far ahead as possible.</li>
</ol>
Relocating commercial spaces is never easy. Through our experiences we know the ins and outs of corporate relocations, so we can help you along the way. This, along with our various space planning, relocation and design partners will ensure that you're well looked after.

Considering an office or warehouse move? Call&nbsp;Simon on 083 261 2861, or email him at&nbsp;simon@blackpepperonline.co.za.

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Industrial Property

9 Jul 2019

Common Aspects of Corporate Lease Structuring

Property Insights

4 Jul 2019

What’s involved in an office fit out?

Property Insights

3 Jul 2019

Tenant Representation

Property Insights

3 Jul 2019

Conflicts of interest as a property broker

Commercial Property

19 Jun 2019

Corporate real estate outlook: what the rest of 2019 holds

Commercial Property

19 Jun 2019

Ethics - and what they mean in the property industry

Commercial Property

19 Jun 2019

Office Space Disruptor WeWork Heads To South Africa

Commercial Property

12 Jun 2019

Johannesburg Office Space

Commercial Property

16 Jan 2019

Johannesburg Industrial Property

Industrial Property

16 Jan 2019

BizTrends 2019: How tech is disrupting - and benefitting - the corporate real estate industry

Property Insights

14 Jan 2019

CoJ's General Valuation Process for Objections and Appeals

SAPOA Updates

9 Apr 2018

Massmart Complaint

SAPOA Updates

20 Jul 2016

Sandton CBD Car Free Zone

SAPOA Updates

3 Jun 2015

Commercial Property Rates & Taxes

SAPOA Updates

3 Jun 2015

Tenant not paying for electricity consumption charges

SAPOA Updates

18 May 2015

Corporate Real Estate Relocations

Property Insights

18 Feb 2015