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 Excellent time to buy a business property

 

 The strength of the business property market boils down to one simple fundamental factor - the demand for space, says Byron Jeacocks, regional general manager at Business Partners Limited.

And all indications are that, with the pent-up growth potential of the South African economy unleashed by the recent leadership changes and the private sector becoming more confident about the country’s future, demand for space will almost certainly increase as businesses seek to expand, and so many more goods have to be moved through larger warehouses onto longer retail shelves. For Jeacocks, there has not been as good a time in many years for business owners to invest in property, and, if they haven’t yet, to buy their own premises from which to run their businesses - provided that they buy a good quality property.

The almost certain increase in the demand for space in a growing economy makes the property market virtually a one-way bet upwards, says Jeacocks.

The most obvious reason for his optimism, although not the only one, is the experienced leadership appointed to the finance and public enterprises portfolios and Government’s renewed commitment to make   key state institutions succeed.

The new South African President is Cyril Ramaphosa who is one of the architects of the National Development Plan, and if his inspiring State of the Nation Address is anything to go by, the focus of his presidency will be on economic development and job creation, says Jeacocks.

Confidence in the South African economy, apparent in the immediate increase in rand strength can only increase further if Government implements its plans as per the SONA and the private sector joins forces with Government in the country’s economic renewal.

Seen in isolation, these positive developments might not have been enough to take the South African economy out of the doldrums, but it happens to be taking place against a global economy that is growing by about 3% per year, and an even higher growth rate in large parts of Africa. It is only reasonable to expect South Africa to start achieving the same growth rates as many as its peers.

Already in the last quarter, the South African economy has achieved a 3% year-on-year growth, perhaps to a certain extent in anticipation of the leadership change. Whatever the reason, it certainly is an indication that a turning point has been reached.

Lower-than-expected inflation figures provide further hope for the property market to strengthen. The figures provide room for the Reserve Bank to decrease interest rates, which always has a positive effect on property prices.

Jeacocks, who is a firm believer in the need for entrepreneurs to own at least the property from which they operate, urges business owners to take advantage of the current state of the property market, and buy.

The argument that renting is less risky for business owners is overstated, he says. A lease holds the tenant liable usually for at least three years, and a sound purchase of a good business property is only risky for the first five years or so, after which the advantages of owning it - as opposed to renting it - becomes definitive.

The one concern for the South African property market is the revival of the debate around land reform but it is still early days to make a call as Parliament still needs to set up a Constitution Review Committee and consult widely on the matter. South Africa is a robust constitutional democracy and if you ask the question will the fears of investors, companies and entrepreneurs around land expropriation lessen the demand for space, and therefore weaken the property market? Not anytime soon, says Jeacocks.

The security of property ownership stands in stark contrast to the uncertainty of rental escalations and if the business is in a position to invest in its business premises or even explore wider investments in property, this should, without a doubt, be considered.

Business Partners Limited co-invests in properties and offers up to 100% commercial property loans. For more details email propertyenquiries@businesspartners.co.za. Terms & Conditions apply.

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