DEVELOPMENT
Breaking into Commercial Property
Commercial Sectional Title often an under-utilised form
BY MICHAEL BAUER
When sectional title property is mentioned , the majority will think of residential sectional title units , which has over the years become a very healthy segment of the property market ( and is still growing ). One form of property ownership that can be a very good investment option , and is under-utilised , is sectional title commercial property . This could include office suites , light industrial units or retail space , particularly for small to medium businesses who in all likelihood wouldn ’ t be able to afford the purchase of a whole building . Nor would they want to invest millions in ( or be able to get finance for ) a whole building or business park as this could possibly over-extend them financially .
Successful investment in commercial property would depend on the usage of the building but often buildings such as light industrial units , for example , could find takers of 250m2 to 500m2 easily . It is not always viable for businesses , particularly small to medium enterprises , to buy large premises worth millions , and then have the problem of subletting areas they don ’ t need and managing the rentals as well as the property .
Mixed Use Refurbishment There are many instances where commercial buildings will be owned by one person or company , but as soon as a building becomes dated and might need renovation or large sums of money put in to update it , the owner will want to sell it to rid himself of the burden . Selling a whole building can be troublesome however
as there is not always a market for large premises , and the easiest way to achieve the right selling price ( and sometimes even get a higher rate for the whole building ) is to subdivide it into sections and sell the smaller units off as sectional title , as the chances are higher that there will be a market for these .
If one were to use the same principle as many residential investors and buy small commercial sectional title units , in high demand areas that are close to public transport and amenities , the rentals could be steady and possibly more lucrative . Businesses tend to rent premises for longer periods at a time and tend to be less demanding in terms of additional fixtures or features of the property . An office block or light industrial park can be quite plain but because it is functional and in the right area , will be in demand . In addition , if one were to find units close to a hospital for example and turn them into medical suites , the chances are high that these spaces will be filled with professionals who would have no problem in paying their rent each month . There are various options available in commercial investment , and the first step is to establish what the investment needs are . It is first prize for a business to own their own premises but there will always be a need to rent for the first few years of their existence and the leases are easier to manage in commercial property . If a tenant does not pay their rent , it is easier to cancel the lease and evict the tenant than it is with residential units .
RESOURCES
IHFM
36 MAY 2016 SA Real Estate Investor www . reimag . co . za