COMMERCIAL PROPERTY PERFORMANCE IN EAST LONDON
Commercial real estate has suffered from high vacancy rates and low levels of demand ever since the pandemic hit our shores. According to Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, this trend is likely to continue for some time.
“Most companies have realised that it is possible to remain productive while operating remotely. Many have also innovated to offer their products and services online. This has put immense pressure on the commercial landscape. Though demand still exists for commercial real estate, landlords will need to learn how to adapt to the current market to avoid long periods of vacancies,” he suggests.
Referring to an expert in the industry, George Van Heerden, Head of Commercial Property for RE/MAX Border in East London says that globally, the shift to remote working has been prolific. “However, remote working has always been more accepted internationally and South Africans still need to get used to the idea of a permanent work from home model. This has of course had an impact on commercial property as tenants have downgraded to smaller spaces, hence the higher demand in smaller offices.”
Pre-covid Van Heerden explains that the commercial market was active but there were already indications of a possible slowdown. “Larger office spaces were starting to stand empty for longer than usual as landlords still expected a high rental yield. On the other hand, demand for retail and warehousing space was still high pre-covid.”
Van Heerden says that demand for these spaces as well as for small office spaces below 100sqm has continued to remain active, however, demand for larger offices remains a concern, with many locations standing vacant. To landlords who currently own commercial real estate, Van Heerden suggests that they look after their tenants and possibly don’t expect to see the same rental yields as they received a few years ago. “A paying tenant in your property is better than an empty property,” he says.
Pricing, of course, varies depending on the area and quality of the premises, but Van Heerden explains that landlords can expect to receive approximately the following in rent for commercial real estate in East London within the current market:
- Warehousing – between R20 to R65 a square meter.
- Large Office Space – between R120 – R150 a square meter and, in some instances, landlords have accepted as low as R80 a square meter.
- Smaller Office Space below 100 squares - from between R100 to R140 a square meter depending on location and quality of the building.
- Retail is slightly more difficult because of its greater reliance on location and size, but prices have stayed relatively consistent since pre-covid days.
For those hoping to enter the commercial real estate market, Van Heerden says that having a knowledgeable and experienced real estate expert is vital in making the right investment choices. “More often than not, the opportunities which arrive never actually find their way to the general market. In East London, it is how connected the real estate agent is, that gets you the opportunity.”
“Property is, and always has been, a good investment vehicle but, as with all investments, you need to make informed decisions about where and what you invest in. I believe there are a number of good opportunities in commercial property at the moment and working with the right agent can help you find those opportunities,” he concludes.