Why rent office space over the long term, when it makes more sense to buy? asks Mike Walters, Divisional Head of Renprop Commercial, a company specialising in both the leasing, sales and development of commercial property. Walters notes that many small to medium sized businesses could be creating wealth in a separate entity by paying off an appreciating asset if they chose to buy their office space instead of rent for a period of more than eight years.
“While renting office space allows businesses the freedom of moving to another location without too much hassle, if a business is in the financial position to do so, purchasing the building or office space will provide an inflation-hedged investment that will either match inflation or outstrip it in terms of growth. After an eight year period, the money spent on rent could essentially go towards ownership of an office building over time and be an asset. As the capital value of the property increases, so will the company’s investment and asset base,” says Walters.
He adds that investing in commercial property is a far less volatile option than investing in the share or equity market provided that the property is situated in a prime location with the tenant as the business and the shareholders as the landlord. “The key to purchasing a commercial property is finding a location that meets all the needs of the business, while positioning the business within proximity to major amenities and business hubs.”
Walters points to one of Renprop Commercial’s latest projects, 110 Conrad Corporate Office Park, as a prime example. Well situated on the corner of Conrad Drive and Jan Smuts Avenue in Craighall Park, 110 Conrad will be made up of eight sectional title office blocks ideally suited to small and medium size businesses.
Five out of the eight units within 110 Conrad are available for purchase at around R17 500 per square metre. These units are also available for lease. The well-known Hackle Brooke conference venue is already operational within this development and all services and infrastructure is complete.
“This location of 110 Conrad is excellent as it is proximate to the financial hub of Sandton while still offering easy access to other commercial centres such as Rosebank and the Johannesburg CBD. It is also well located close to major transport routes and other facilities such as the Colony Shopping Centre, Planet Fitness Gym and a variety of restaurants. The Hackle Brooke conference venue offers a conference centre and meeting room facilities within the 110 Conrad development as well as coffee shop and restaurant ideal for light lunches and informal meetings,” says Walters.
The current plans reflect buildings that offer two floors of office space ranging in size from 100m2 to 1300m2, with basement parking below and ample visitors parking provided for. Investors can expect occupation from early to mid 2014.
According to Walters, those wanting to create wealth for the shareholders of the business through the purchase of office space but who are unable to pay cash for the building can apply for finance. He says business property loans are usually calculated over a ten year term and a deposit of approximately 30% or more will be required.
“A business that is well positioned will have a distinct advantage in today’s challenging and competitive trading environment. Office park developments such as 110 Conrad provide businesses with the opportunity to be in a prime location and have the option of growing their asset portfolio,” Walters concludes.