Is your commercial property broker representing your business or your landlord?
According to a recent report by Savills, while strong demand for top-quality spaces continues to underpin prime office markets around the world, in some markets landlords are having to work harder to attract and retain tenants, with concessions and incentives being used to help offset rising costs to occupiers.
Says Alex Oberholzer, head of the occupier services division of Swindon Property, Savills’ commercial property associate for in sub-Saharan Africa: “Globally, as stated in Savills’ report, in recent years, concessions and incentives have become increasingly important to attract and retain tenants in a competitive office market. "
He said that work-from-home and pandemic-era trends such as hybrid working and hotdesking have made a lasting impact on the leasing environment.
“Demand for fully fitted turnkey space in prime locations has grown. This type of space is desirable to tenants for its ‘plug-and-play’ benefits, allowing quick move-in and set-up times for new tenants. "
Occupiers increasingly demand high-quality, fully built-out space without needing to invest time and money into planning and executing the design themselves.
“Increasing fit-out costs are rising due to a variety of factors, including a general increase in labour and material costs, as well as inflationary pressure, which is true in South Africa as well as internationally.
"This creates a challenge for both landlords and tenants – for landlords, it means that it will likely be harder to market undeveloped space and more expensive to commit to turnkey developments. Tenants, on the other hand, may be forced to account for these prices in their office footprint decision process.”
Rent-free periods are another popular means of incentivising leasing activity in a building, especially in light of higher fit-out costs.
"Over the past five years, the global average duration of these rent-free periods has increased from approximately 7-10 months over the typical lease term, particularly in markets facing higher vacancy," he said.
In some markets, landlords are going above and beyond the standard amenity provision. In addition to gyms and conference centres, ESG (Environmental, Social & Governance) credential upgrades to buildings and even sports facilities such as basketball courts have become additions.
So what are key factors and amenities which tenants look for today in a commercial property to rent?
According to Swindon Property, these are top of the list among commercial property tenants:
Location: Accessible and convenient locations with proximity to transportation hubs, major road networks and amenities such as restaurants, shops, and banks are highly desirable.
Safety and Security: Tenants prioritise properties with robust security measures.
Quality of Infrastructure: Modern and well-maintained buildings with reliable infrastructure, including electrical systems, HVAC, telcos, and even back-up water is becoming another key imperative.
Flexible Space Design: Tenants look for flexible space layouts that can be easily adapted to their specific needs, whether it's open-plan offices, modular workstations, or customisable floor plans that accommodate future growth or changes in business requirements.
Energy Efficiency and Sustainability: Increasingly, tenants prioritise environmentally sustainable buildings with energy-efficient features such as LED lighting, solar panels, green roofs, and water-saving fixtures.
Amenities and Facilities: Properties offering on-site amenities and facilities such as cafes, gyms, conference rooms, co-working spaces, childcare facilities, and outdoor recreational areas.
Parking and Accessibility: Sufficient and secure parking facilities, including both on-site and off-site parking options, are important.
Cost-Effectiveness: While tenants seek quality amenities and facilities, they also prioritise cost-effectiveness.
Van Schoor said that apart from the above factors, tenants are also advised to take into account the following when looking to lease space:
Lease terms and potential hidden or variable recovery charges, especially where these are based on pro-rata cost allocations, such as charges regarding common areas
Potential rates increases during the current term of the lease over and above rental escalations
Operating expenses
Potential maintenance issues due to the age and upkeep of the property
Office locations that are affected by severe traffic congestion or potential external security issues
Flexibility for future needs
Regulatory compliance and zoning
Understanding the nature of the other tenants in the building eg a business with high staff volumes per sqm will negatively impact access to lifts, common areas etc
Tenant rights and dispute resolution.
“Primary common areas are those that all the tenants have use of, with costs split on a pro-rata basis among all the tenants, while upper floors would also have a secondary common area such as a first-floor lobby, the costs of which are split between only the first-floor tenants."
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