Real Estate Investor Magazine South Africa April/May 2019 | Page 41

INDUSTRIAL
How to Negotiate your Rentals like a Boss
K
EPPING PROPERTY
nowing precisely what market rentals are doing is an
Bales says that during the higher inflation era of 1980 to
essential part of all rental negotiations. Rental growth
1999 industrial rentals grew by 12.76% per annum, and the
affects values within the industrial property sector and
average contractual lease escalations were 12% per annum
is a large determinant of business costs.
during this period. During the lower inflation era of 1999 to
According to Tony Bales of Epping Property, property
2018 industrial rentals grew at 5.81% per annum.
investors need to be able to time their investments at the
Compounded over the last 12 years, industrial rentals have
best stage in the rental cycle.
grown by 8.04% per annum.
Likewise, businesses looking
According to Bales, the rentals in
to enter into a new lease
Epping Industria are viewed as a good
It is currently a good time to be sample for average long-term rentals
must be aware of the rental
cycle as one may be able to
negotiating a new (or renewed) in Cape Town, and quite possibly, the
lock into a longer term lease
entire industrial property sector in
lease for industrial property
that will limit the upside in
South Africa.
rentals if the market rentals
Due to the current depressed state
as landlords are keen to retain
are accelerating faster in the
of the economy and the lower GDP
tenants or fill their vacant spaces. cycle, industrial rentals are currently
short term.
So just how much have
flat, or at best, in a low growth phase.
industrial property rentals in
This means that rental growth in
Cape Town grown over the
the short term will be limited. It is
years?
currently a good time to be negotiating a new (or renewed)
Epping Property has analysed the historical data for
lease for industrial property as landlords are keen to retain
industrial rentals in Epping Industria in Cape Town as far
tenants or fill their vacant spaces. Also, when the market does
back as 38 years and says that the findings reveal that periods
pick up, industrial rentals will accelerate faster than inflation.
of low growth and/or periods of high growth can significantly
‘While the average statistics on rental increases indicate the
influence shorter-term trends, but that the long-term growth
general trend, one does have to be mindful that each set of
tendencies are nonetheless apparent.
industrial premises has different attributes. So, each and every
‘Average growth in rentals over time, short growth
premises will have different market rentals at any one point in
periods, stagnant growth periods, and sudden downturns can
time. For this reason, Epping Property recommends keeping
sometimes skew one's idea of long-term trends. However, the
in close contact with a specialised industrial property broker
results speak for themselves and industrial rentals have grown
who can give you an accurate assessment of a premises' correct
by 9.23% per annum compounded over the last 38 years.’
current market rental,’ says Bales.
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SA Real Estate Investor Magazine APRIL/MAY 2019
39