Advice and Opinion

Increase in small businesses buying sectional title office space

When small businesses and entrepreneurs choose their office space, qualities such as affordability, flexibility, low overheads, good security and hassle-free ownership are first prize. They look for smaller properties with just the right positioning to complement both their brand and budget. That is why more and more South African small businesses are investing and setting up shop in sectional title office units.

As their monthly bond costs are relatively the same as what their rental would have been, the business earns an asset on its balance sheet, and the property can become a “pension fund” for the small business owner.

Wayne van der Vent, co-founder of the online property trading portal Quoin Online, says the country’s sectional title office sector has become more buoyant because of the size of such an investment, making it affordable to a wide range of buyers. These units’ price range also attracts a greater market of buyers, which in turn fuels prices.

“Sectional title developments allow for smaller investors to access the market in well-located, large buildings, taking up smaller spaces whilst still enjoying the convenience of more spacious office blocks. The units range in all sizes, which makes it possible for a broad section of investors to participate,” he says.

As sectional title office units are often purchased by owner occupiers (including small businesses and entrepreneurs), the criteria for purchase is not only driven by investment return, but also by accessibility and location. “Sectional title units allow for reasonably hassle-free ownership for new and small investors as maintenance of the general property, and the upkeep and cleaning of common and public areas are managed by a body corporate,” says Van der Vent.

The upside of sectional title office units and why small businesses and entrepreneurs prefer them

– Owners can share costs.
– Better budgeting as the monthly levy (for insurance premiums, as well as the common property maintenance, water and electricity costs, and security staff and cleaner wages) is a fixed cost.
– Employees can share communal facilities such kitchens, showers, bathrooms and gyms.
– Dedicated secure, off-street parking bays for clients and employees.
– Heightened, 24-hour security.
– A more communal character and atmosphere.

The downside of sectional title office units and what small businesses and entrepreneurs should weigh up before investing and moving in:

– Majority rules – owners have to abide by a body corporate’s rules and ask permission if they want renovations done.
– Sometimes a lack of consensus on renovations and repairs, although this is more prevalent in residential developments; trustees in office developments are often aligned in their vision to supply good space and maximize rentals.
– Little or no control over expenses.
– Liable for body corporate debt.

A growing demand for sectional title office space

According to Van der Vent there has been a demand for sectional title office units, particularly in Cape Town’s Century City precinct. “Over the last few years, several office blocks have been developed quite successfully and then disposed of on a sectional title basis. This has also been a chosen method of disposal of office blocks in various CBD areas around the country,” he says.

“Like all other commercial property, the prices of sectional title property have been driven by market rentals and capitalization rates.” He points out that there is a general shortage of good property stock in the market, which has been pushing up prices. “As C- and D-grade office space continues to be converted into residential, so the shortage of good, well-located, medium-sized offices will increase.”

Van der Vent says what has been working well for Quoin Online, which specialises in the sale of commercial property (including sectional title premises), is to focus on the sale of portfolios of properties, instead of single units in a development. One such portfolio that was recently awarded to Quoin Online is the newly furbished Howard Terraces in the leafy Cape Town suburb of Pinelands, located conveniently close to the CBD.

Howard Terraces – a well-timed investment opportunity for small businesses

Ideally situated just off Forest Drive and within walking distance from the Howard Centre shopping mall, the 12 exclusive sectional title office units are the perfect investment opportunity for small businesses, entrepreneurs or small real estate investors who want to be part of the Pinelands buzz. More and more young people are moving into this traditionally tranquil neighbourhood, while the Western Cape Government is planning to break ground on an ambitious multimillion-rand, mixed-use neighbourhood development in Pinelands by early 2018.

Howard Terraces, a five-story, terraced building in Rose Innes Street offers 24-hour security with cameras and surveillance, while owners or tenants can save costs by sharing the communal kitchen on each floor. Two floors also have shower facilities. An added bonus is the units’ great natural lighting, a green feature that will help occupants save on their power bills. Howard Terraces’ current tenant mix ranges from recruitment and IT, to investment companies.

The units are between 140m² and 272m², and the asking price between R1 850 000 and R3 450 000. They have an average of four parking bays per unit, while the smaller ones have three parking bays, and the larger ones six. All northwest-facing units sport balconies with impressive views.

Pinelands is going places

The suburb of Pinelands has somewhat of an intriguing history. Being fascinated with the Englishman Ebenezer Howard’s garden city concept in the early 20th century, Richard Stuttaford, chairman of the Cape Town Chamber of Commerce and head of the familiar department store, proposed that a garden city be established in Cape Town – a place where people can live harmoniously together with nature in a type of utopia. Stuttaford had it all uphill as no one seemed to support his implementation of Howard’s idea of a rural type urban development. But he persevered and in 1922 Pinelands became the world’s third official garden city.

Traditionally a “dry” area with no liquor stores in the suburb, Pinelands has always been known as a peaceful neighbourhood, sporting large thatched houses and plenty trees, churches and retirement homes. But lately this laid-back area seems to be shifting gears.

Being located on the edge of Cape Town’s southern suburbs and close to the CBD, Pinelands is attracting a growing number of younger residents. The Western Cape Government is planning a new “Better Living Model Game Changer” development on the former Conradie Hospital 22ha site in the area. It will consist of over 3 000 residential units, as well as business premises, schools and safe, green public spaces. The development with offer about 10 000m² of retail space and 14 500 m² of commercial space, stimulating small business growth in Pinelands.

All these elements make Pinelands an attractive option for small businesses and entrepreneurs to establish their offices, especially if they favour Howard’s garden city atmosphere and the area’s community feel. It is served by two railway stations and its location is convenient for most clients and employees based in the southern suburbs or town.