Electricity hikes a key concern
A KEY FACTOR that will continue to affect the returns earned by commercial property owners is rapidly rising operat­ing costs.
Latest figures from Sapoa show that operating costs increased by a hefty 18,6% in the year to September 2009, substantially above the inflation rate (CPI) of 6,1% over the same period. Average retail operating costs were R55,40/sq m which translates to a 24,8% increase. Office space costs were up 11% to R32/sq m, while industrial property costs increased 11,9% to R10,30/sq m. The two largest contributors to operat­ing costs in all sectors of the commercial property market are electricity charges and rates and taxes, contributing 27,1% and 19,7% respectively.
Rodney Luntz, MD of Lew Geffen Sotheby's International Realty Com­mercial Investment Property, says rising operating costs will become an increas­ingly important factor impacting the performance of the commercial property market. He says rising electricity costs, in particular, will provide an incentive for owners and developers to look towards sustainable green building solutions to reduce overall energy requirements.
Says Luntz:"With the current over­supply of space in all sectors, those landlords who have managed to limit the increase in operating costs are in a far better position to let their premises, because tenants are now looking at their overall cost when selecting suitable premises."