Why Compromise and Commitment are Key
Loadshedding has become an everyday reality for South Africans. However, last week’s focus on the energy crisis during the State of the Nation Address (SONA) should be viewed as a positive. As our CEO John Jack explains: “Taking a focused and expedited approach to electricity disruption will give the country solid footing for growth.”
It’s no secret that South Africa is under major pressure and that the commercial property sector has been hard hit. Currently, commercial property landlords are under pressure to invest in alternative energy solutions to attract and retain tenants. However, the upfront costs of this investment coupled with the challenges of high vacancy rates, interest rate hikes, rising business costs, and reduced rental rates have had a compounding effect on the sector.
In addition to the factors previously mentioned, the reality is that loadshedding affects business productivity. While some landlords are lucky enough to secure a sound tenant on a long-term lease, others have defaulting tenants, short-term leases, and tenants who simply cannot make ends meet when they have no power for hours every day.
The price of tenant retention
Yes, some commercial properties are now geared up with an alternative power solution, but the reality is that many others don’t have the capital to do so given the challenges they face.
It’s important to keep in mind that the country has undergone six rate hikes in just one year. This has a major impact on monthly bond repayments – especially given that most commercial properties cost millions of Rands. Buildings cost a fortune to run and a lot of what’s being invested cannot be recouped.
Speaking to whether tenants should contribute to the costs of an alternative energy solution, John answers saying, “not really”. “However, it is important to keep in mind the insurmountable effect that load-shedding has on economic productivity, and therefore, the energy crisis is everyone’s problem.”
The industry needs more collaboration
Our advice to both landlords and tenants is to come to a compromise. Whether it’s agreeing to a longer lease term or a minor increase in the monthly rental repayment, or perhaps agreeing to share the cost of installing a generator or a similar solution, there should be a clear understanding of the benefits to both parties.
Becoming energy independent is crucial to our economic success.
