Commercial property investments yield higher rental returns

MANY property investors in the Western Cape are switching to commercial property because it almost always gives a 10 to 12 percent rental return from the outset, according to Marc Vladislavich, the co-franchisee with Liz Grimbeek for a Rawson Property Group Cape Town commercial franchise.

“Commercial property rents are on average 4 to 5 percent higher than those for residen- tial property and often the leases are longer term. The second reason for favouring this investment channel is that in the Western Cape, as a recent TPN credit bureau report has shown, tenant behaviour is now satisfactory and reliable.”

He says the latest TPN Report shows that by the end of last year, 87 percent of Western Cape commercial tenants were in good standing with their landlords, and 64 percent were paying right on time. “Only 5 percent did not pay at all and the remaining 31 percent either paid late or paid partially. It should be noted that the 5 percent of non-payers is 2 percent below the national average.”

In the Western Cape, said Liz Grimbeek, the best rental performances conformed to the national average. Tenants in the R50 000 plus a month category had proved to be the most reliable payers, whereas those below the R10 000 bracket tended to be the most erratic.

She says this indicates that small and start-up businesses are less able to withstand the tough economic conditions of the last few years. However, the demand for premises smaller than 300m remains strong, and replacing a tenant here is seldom difficult and is usually achieved within three to four months.

“We can rent out many small factories or warehouses very quickly, especially units that are in security estates and have their own office space.

“The best performers in the Rawson rental management portfolio are units in Century City, Montague Gardens and Paardeneiland.”