The past few years have seen Cape Town’s property market flourish despite a tough economy and lacklustre property investment in South Africa as a whole. In a market where prices seem to just keep rising, what strategy will deliver the best results for commercial property investors?
Everyone’s buying – why shouldn’t I?
For prospective commercial property tenants and buyers, the choice between buying commercial premises and leasing over the next 3-5 years seems an easy one to make.
As the wave of “semigrants” from other provinces brings new families and entrepreneurs to the Mother City, demand for commercial property is following the residential market on its upward path. For investors with the capital (or access to finance in the form of a bond), now seems the right time to buy and reap the rewards of future growth.
If you’re a commercial property tenant and are thinking of investing in office premises instead of leasing, you may be able to find an office unit for sale that suits your needs and your monthly budget. As prices rise, you’ll have a valuable business asset that could gain value over the next decade – instead of a lease which will likely become more expensive as demand for commercial property continues to rise.
It’s better to lease what you can afford than buy what you can’t
While some tenants may be in a position to buy their own premises, there are company owners who would rather commit their capital to expanding their business first.
Committing to a fixed location may also seem risky to entrepreneurs who are considering expansion to other parts of South Africa or overseas in the near future, making a reasonably-priced lease the perfect vehicle for them.
Before you join the wave of Cape Town property investors, it’s essential that you calculate the affordability of buying your own premises. If the numbers don’t make sense, you’re better off leasing and keeping your business overheads manageable – especially with challenging times persisting in the SA economy.
Owning vs. leasing – a matter of responsibility
One of the biggest differences between owning and leasing a commercial property is the responsibility that owners have to assume.
- From maintenance and cleaning to security – and securing tenants – there are a lot of things that you’ll need to arrange as a commercial property owner.
- Appointing a good agent or management company is essential if you’re buying to lease and want to keep relations with your tenants’ cordial.
- Owning a commercial property requires daily attention to detail, but it offers several advantages over owning a residential rental property.
- Yearly rental escalations are standard, and evicting tenants who violate their contracts is far easier as a residential property owner
With rising prices, a good rental yield, and a few decades to wait, a commercial property may be the perfect investment for entrepreneurs and business owners who are looking for a reasonably-priced investment in Cape Town.
To view our extensive portfolio of commercial properties in the Cape Town area, contact us today.