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Electricity supply a big issue for tenants

Feb 24 2015 13:37
Carin Smith

(File) (Shutterstock)

Company Data

REDEFINE PROPERTIES LIMITED [JSE:RDF]

Last traded 8
Change 0
% Change 1
Cumulative volume 38349925
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - The big issue for commercial and industrial tenants in SA has become certainty of electricity supply, according to Andrew Konig, CEO of Redefine Properties [JSE:RDF].

Redefine has recently celebrated 15 years since listing on the JSE and has assets in retail, office and industrial categories throughout South Africa.

"The big issue for us property owners regarding Thursday's National Budget is about electricity and the energy crisis. Load shedding has become unpredictable. We would want to know what the government's long term plan is for Eskom," Konig told Fin24.

"We are making our retail centres self sufficient and some of the cost would, of course have to be carried by our tenants."

According to David Rice, Redefine's chief operations officer (COO), the pressure is not so much on retail space as on office space. Therefore, one will not see reasonable rental growth in office space at the moment, in his view.

As long as there is no growth in employment office demand will be constrained.

Office vacancies are further impacted by tenants also becoming more and more space efficient. In the past companies used 18m² to 20m² per employee, but it has now shrunk to about 8m² per person.

Leon Kok, Redefine's financial director, added that the tendency for employees not to be office bound also makes an impact on the demand for office space.

"Luckily we also have our retail and industrial assets and international investments," said Konig.

READ: Time to invest in your own office block

Foreign ownership

The other issue Konig raised, though it does not affect Redefine itself directly, is foreign ownership of property in South Africa. About 18% of Redefine's shareholding is based outside SA.

"I know clarification on the issue came after the State of the Nation address, but for us it remains a bit of an issue as it impacts the perception of international investors," said Konig.

READ: Diversifying into offshore property

Local government

Another issue he raised as important for the commercial, retail and industrial property industry, is the support needed from local government, in terms of town planning for instance. This kind of support currently varies geographically.

"Then there are also administrative issues regarding local government, like the resolution of queries about building matters and about rates and taxes," said Konig.

"It is a painful process to resolve issues with local governments, like revaluations for smaller retailers, especially."

The hight churn in staff at local government level is another frustration.

"Local government must realise that commercial development brings jobs and economic growth," said Konig.

"We are looking at a number of opportunities at the moment, since we now have a fantastic platform from which we can take acquisitions on our own. We want to grow more and be geographically more diversified."

ALSO READ: Redefine building in CT CBD going green

redefine properties  |  budget 2015  |  property
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