Large property groups are literally buying tenants by luring them over to their property portfolios by offering to take over their current leases. On top of this, they are also providing extremely desirable replacement leases.
This is according to Org Geldenhuys, managing director of property development and management company, Abacus DIVISIONS. “What we are seeing,” he said, “is that large property companies are focusing on blue chip companies scattered over multiple locations and luring them with desirable leases – as well as taking responsibility for their current leases. Those companies who are lured in are then placed in a centralized office park in order to maximize space and returns for the landlords. This move – which is on the increase – is tantamount to landlords buying tenants,” said Geldenhuys.
He said that due to the slow recovery in the commercial property market, many landlords are looking at unique ways to attract tenants, including doing away with deposits and offering far more bang for the tenant’s buck, including spending more money tailoring offices to suit the exact requirements of tenants. This latest trend, however, takes matters to a greater level. The bigger players – with the necessary critical mass – are using their financial muscle to decrease vacancies in their property portfolios, often to the detriment of smaller players.”
Geldenhuys said that “in many instances” smaller players were unable to dispense with deposits and were unable to attract tenants by offering to take over their current leases.
“On the one side of the coin it is good for the market as it provides a lot of benefits for tenants – and boosts business confidence – but there are, however, repercussions for the smaller property companies, or groups. Their tenant vacancies could increase.”