Com­mer­cial prop­erty sec­tor ‘needs a help­ing hand’

Weekend Argus (Saturday Edition) - - PROPERTY -

THE GOVERN­MENT and the banks need to un­der­stand that if the com­mer­cial prop­erty sec­tor is not helped to emerge from its cur­rent back­wa­ter, it could take the en­tire econ­omy down to a new low.

This is the view of Tony Clarke, man­ag­ing di­rec­tor of Raw­son Prop­er­ties.

“There has re­cently been con­sid­er­able fo­cus on and me­dia pub­lic­ity about the resi- den­tial sec­tor, and the lat­est data does in­di­cate that it is lead­ing the prop­erty world out of the re­ces­sion,” he said.

“How­ever, the com­mer­cial sec­tor still lags far be­hind, with high lev­els of va­can­cies, de­fault­ing ten­ants and reg­u­lar land­lord liq­ui­da­tions.”

Clarke said that, as a first step, the banks could look at ex­tend­ing the length of com­mer­cial bonds. At present most are signed for pe­ri­ods of 10 years, but bonds of 15 or 20 years, as in the res­i­den­tial sec­tor, could ease the sit­u­a­tion for hard-pressed land­lords and prove more profitable to the banks in the long term.

On the gover nment side, said Clarke, the Sars tax leg­is­la­tors could look at giv­ing big­ger de­pre­ci­a­tion al­lowances and tax write-offs.

They could also study the mer­its of mort­gage in­surance to help land­lords cover bond pay­ment short­falls if their ten­ants de­faulted – as is now of­ten done in the res­i­den­tial sec­tor.

“It is en­cour­ag­ing that the big pri­vate eq­uity prop­erty own­ers are find­ing ways of stand­ing by their ten­ants through the cur­rent dou­ble-dip down­turn, but smaller land­lords fre­quently do not have the re­sources to do this – and more will in­evitably go un­der if not as­sisted in some way,” said Clarke.

“It can be dis­as­trous for any area when one or more build­ings stand va­cant and ne­glected as a re­sult of ten­ant and land­lord fail­ures. We must not let this hap­pen.”

He said state help might be needed as the com­mer­cial sec­tor was in a “po­ten­tially crip­pling sit­u­a­tion”.

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