FUTUREPROOF YOUR SME real estate sector expected to grow by 5 % in the lead up to 2027 . In the wake of the pandemic and with the advent of remote working , office demand dynamics have softened but substantial gains have been made on the industrial segment front , with many small- and largescale retailers needing industrial storage and distribution space for products bought via their e-commerce platforms .
Many assumed that the shift to remote working would render commercial property all but obsolete . However , an increasing number of South African companies have downscaled their operational spaces to allow for hot desks and hybrid working models , rather than doing away with the need for property altogether .
As various industries adapt to the needs of an evolving working world , small business owners stand to gain a foothold in the property sector by either purchasing their business premises or purchasing the space to lease it out to other small businesses and retailers .
Longer leases as the grounds for better financial stability Commenting on the potential advantages of owning commercial property versus residential spaces , Govender advises that the former usually involves longer term lease contracts of between three to five years ( compared to one year for residential property ).
As he asserts : “ Owning commercial property requires a long-term mindset . Securing a tenant or multiple tenants for a few years at a time will allow entrepreneurs to factor this monthly rental income into their budgeting and forecasting exercises .
In light of this , owning commercial property provides for a better sense of financial security and certainty in terms of your income stream . SMEs therefore stand to benefit from more sustained and healthier cashflow – a factor that is crucial to the longevity of a small business .”
Portfolio diversification as a risk management strategy Generally , commercial properties fetch higher yields and appreciate more in the long term than residential spaces . Several experts also agree that investing property involves a lower level of risk than other forms of investment such as investing into stocks and bonds .
SA Real Estate Investor Magazine APRIL / MAY 2023 106