Reliable tenants in Western Cape make commercial property a popular investment option

There are, says Marc Vladislavich, co-franchisee with Liz Grimbeek for a Rawson Property Group Cape Town commercial franchise, good reasons why so many property investors in the Western Cape are swinging to commercial property. 


Front view of a typical example of office space in Milnerton, Cape Town. These premises rent out for R65.00 per m²

The most obvious of these, he said, is that such property can give a 10 to 12% rental return from the outset. Such rents are on average 4 to 5% higher than those achieved in residential property and often the leases are long-term, i.e. three to five years.

The second reason for favouring this investment channel, said Vladislavich, is that in the Western Cape, as a recent TPN Credit Bureau Report has shown, tenant behaviour is now satisfactory and reliable.

“The latest TPN Report,” said Vladislavich, “shows that by the end of 2012 87% of Western Cape commercial tenants were in good standing with their landlords and 64% were paying right on time. Only 5% did not pay at all and the remaining 31% either paid late or paid partially. It should be noted that the 5% of non-payers is 2% below the national average.”

In the Western Cape, said Liz Grimbeek, the best rental performances conform very much to the national average. Tenants in the R50,000 plus per month category have proved to be the most reliable payers, while those in the sub-R10,000 bracket tend to be the most erratic, indicating that small and start-up businesses are less able to withstand the tough economic conditions of the last few years. However, she said, the demand for premises smaller than 300 m2 remains strong and replacing a tenant here is seldom difficult and is usually achieved within three to four months.

“We can rent out many small factories or warehousing space very quickly, especially if the unit is in a security estate and has its own office space,” said Grimbeek.

Currently, said Grimbeek, the best performers in the Rawson rental management portfolio are units in Century City, Montague Gardens and Paarden Eiland.

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