Commercial properties come with their share of fixed monthly costs – and unfortunately, these are set to rise.

From electricity and municipal rate hikes to the prospect of caps on monthly rentals, there are several challenges on the horizon for commercial property owners. Here are some of the challenges the sector may face in 2020 and beyond, and some ways to meet them head-on.

Rising costs, slowing growth pose a double challenge

The peculiar state of the SA economy, with GDP growth staying low while municipal and utility costs rise, presents a unique challenge to the commercial property sector.

While a fast-growing economy can help property owners to absorb rising costs, the current slow growth means that everyone – commercial tenants included – is having to tighten their belt.

At the same time, municipalities are raising their rates, electricity and water charges in order to balance their budgets. Add the ongoing problems at Eskom to the mix, and there’s only one outcome for property owners: higher costs.

  • According to the latest SAPOA Operating Cost report, operating costs now account for just over 35% of revenues for the average commercial property.
  • Since municipal charges make up 62% of these costs, they are definitely the main expense item to watch.

Higher costs, more worries?

While operating costs increase in the commercial property sector, some building owners find themselves worrying about their current situation.

With a less-than-reliable electricity and water supply, delays in building permits and problems with crime on construction sites, there are plenty of challenges to face.

Building owners who face them effectively will be making a great future investment.

How to reduce operating costs and weather the storm

As South Africa recovers from the damage done by state capture and pulls together to avoid a junk status downgrade, now is the time to cut costs, run a lean operation and invest for the future.

Here are some simple ways to keep your commercial building’s operating costs down.

  • Go smart. High-tech solutions like automated climate control, a generator to keep the business running during load shedding, solar power, and low-energy lighting can substantially reduce your monthly costs.
  • Go green. Water and electricity usage can add thousands of Rand to your monthly expenses. Green energy and building management practices are key when it comes to reducing costs.
  • Keep occupancy high. Whether your occupancy is 10% or 90%, you still need to maintain your building – the higher your occupancy, the better.
  • Repurpose and diversify. If your office space is vacant, you may want to repurpose some of it as retail or restaurant space – or commercialise your parking lot. The possibilities are endless!

By boosting your building’s monthly income and cutting expenses, you’ll create a healthy financial cushion that will help you weather any future cost increases. When times are uncertain and costs are rising, there’s nothing like a healthy profit margin to fall back on.

Need to streamline your commercial property? We can help.

When it comes to boosting your occupation rates, attracting the best tenants, and selling office space to create some cash flow, there’s no better partner than a commercial property area specialist.

Fortunately, that’s exactly who you’ll find on the Commercial Space team. Contact us today and we’ll work with you to ensure the success of your commercial building.