Real Estate Investor Magazine South Africa February/ March 2020 | Page 45

T
ough times in South Africa’s economic growth, where
the rand is fraught and business growth is very
low, make it extremely incumbent upon real estate
investors to look for other business mechanisms that will
help them boost their wealth The diverse commercial real
estate sector is one of the most financially rewarding sectors as
it makes great returns.
Most of their unused spaces are leased out to maximise
on wealth. Director at a property financial services provider,
Fedgroup, Suraj Lallchand says, “Investors can also rent out any
unused space, especially if they bought a bigger property than
they need to accommodate future growth.”
As a commercial property owner, one can also reach
out to cell phone providers and ask if they need a tower in
the area. “Would they like to erect it on your property (as a
property owner)? Are you well-positioned to offer billboard
advertising, or building wraps? There are numerous ways
in which buildings can be used to make money. Equally so,
there are plenty ways to attract tenants to let in your property.”
How to attract tenants
RETAIL
Hire a property manager
Investing in commercial real estate sector, specifically in the
retail industry, owning a shopping centre and leasing to retail
shops can be a lot of work. It has a lot of administrative duties
that include collecting rent, handling maintenance requests
and negotiating lease contracts. These duties could be
overwhelming for an employed investor busy with other day
to day commitments and an outsourced property manager
could come in handy.
solar power might come in handy. The question you should
be asking yourself is, “how different is my property from my
competitors down the road?” It's things like free parking space
and kitchen space that appeal to tenants.
The real estate sector’s diversity allows investors in this
sector to use their main source of business (property) in
various ways to make profitable returns. Using their properties
to maximise wealth and increase their financial returns,
commercial real estate investors are enjoying the benefits that
come with letting their properties. While owning property and
letting remains beneficial to commercial property owners, it is
extremely beneficial to businesses which choose to lease space
and not necessarily purchase own properties.
Renting business premises provides more flexibility for
businesses as they grow. The business is not locked into the
ownership of the property and can easily discuss the lease
agreement with their landlords. Renting business premises gives
businesses space for negotiation. Financially, renting property
can make good business sense for tenant businesses as the
upfront costs for leasing are often low and refundable deposit
can be considered some kind of an investment on its own.
Why do it?
The ultimate purpose of renting out some of your commercial
property is to make as much money out of it as possible. By
renting out your commercial space, you stand greater chances
of making money in an easier manner. International real estate
investor, Dolf de Roos believes that leasing in the commercial
sector is wise because leases with companies last longer and
sometimes last for more than 20 years. He says, “longer lease
duration means fewer lease renewals and fewer searches for
tenants.”

Offer good security
Retail shops handle large sums of money on a daily basis. Some
keep the money in their safe storages within the retail centres
and need intense security measures in place to protect the
wealth and the people working in those shops. It is one of their
important requisites to observe prior to signing any leasing
agreement. It is highly unlikely that shop owners would invest
in any retail shop that doesn’t have strict security measures like
alarm systems, secure locks and guards, in place.
OFFICE
Strategic property location
Location in the real estate sector is a point of concern for both
property owners and tenants. Whether or not the property
makes money is sometimes dependant on the location of
the building. For property owners intending to lease their
properties for office use, it is important that the building is
situated in an environment that is conducive for the running
of the business. Business tenants often prefer buildings that are
in quieter locations, and if not in, close to the Central Business
District of that particular city.
INDUSTRIES
Highlight cost-saving features
Often tenants are enticed by very small cost-saving features of
an apartment and in the midst of the load shedding and high
water and electricity, price-saving mechanisms like the use of

“If you have a tenant with six years remaining on a
10-year lease, then you know for the next four years
(barring the tenant going into bankruptcy) you will have
an uninterrupted stream of rental income,” He said. This
allows the commercial property owner time to grasp a
sense of certainty, project their finances into the future
and expand their portfolios with conviction and pride.
In residential property, tenants break away from their
full year lease agreement and substitute their stay
with another tenant in a bid to escape paying rentals
while they’re not residing on the premises. This is risky,
because should there be any faults on the premises
while the original tenant is gone, the sub cannot be
completely held accountable as they had not signed
any contract. De Roos says, “In commercial real estate
leases, if the tenant sells their business, such a sale
must first be approved by the landlord. In addition, if
the new tenant defaults on rent, as the landlord you
can go back to the original tenant and collect it.”
The reason for investing in the commercial real estate
sector is generally because investors want to maximise their
financial horizons. It remains the best option for this and
other reasons — like securing your wealth. It is a lifetime
investment that certifies financial growth and independency.
Start-up entrepreneurs are always looking for spaces to start
their business, so property owners have the demand and
therefore can begin their business venture into renting out
their commercial real estate.
SOURCE Fedgroup
SA Real Estate Investor Magazine FEBRUARY/MARCH 2020
43