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Is Property Management Skills A Requirement For The Retail Business Owner ?
Author : Jean Jordaan
Submitted : 2011-08-01 Word Count : 870 Popularity: Not Rated
Tags: office, retail property, shop, shop in pretoria, commercial property to rent, south africa
One of the paramount questions being asked by company owners is whether to let from a landlord or whether to buy into a commercial premises and conduct your business from that premises ?
The answer is not as simple as it may appear. Having an asset and repaying that property may look very attractive but it may be unusually complicated to source such a property. For a small company owner this may well be way beyond his or her means since great positions are held by major property owners and the premises in these positions are customarily of great cost .
The business establishment owner have to evaluate his point of view regarding the following:
1. What need the exposure be that his/her company requires ?
2. Does he/she demand prime exposure ?
3. Does he/she demand a high feet count ?
4. How close is the location of the property to the target market of the company ?
These are all factors that has an influence on whether the company owner will purchase or let a premises. Small properties are as things go not available at prime addresses for sale, since they are, on balance, part of a large shopping centre where landlords specialize in acquiring and managing the assets.
The business owner on balance faces a problem whereby he/she cannot acquire a sole premises for their business establishment and as an approximation ends up with a commercial property with his/her business establishment together with other companies. This results that the company owner need to carry out property management duties. Property management duties are a subject matter totally on its own and require specialized resources to do property management.
Business establishment owners at large do not want to end up being property managers. Negotiating contracts, negotiating lease fees, handling tenant queries, solving tenant complaints, maintaining the property, ensuring the correct tenant combination, servicing the property on a daily basis is not necessarily within the scope of a retail company owner.
Preferences do in any case differ and we do find that most business owners would rather rent then buy into property. The rental amount is seen as a business expense which has considerable tax advantages. The business owner is also at liberty to relocate his/her company and not be barred by a fixed asset that cannot be moved. This has the advantage that should the demographics of a demarcated area change then the company owner can relocate his / her business establishment by either negotiating with the landlord to cancel the lease agreement or by waiting out the excess of the lease agreement and then not renewing for a further period.
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A typical commercial property to rent for retail company owners will not suit them to buy into the business premises. A typical example will be a shop to rent in Pretoria, South Africa, where tenants are, by and large, looking at office space between 50 and 100 sqm. Looking at this centre it will not make sense for a business owner to buy. We thus conclude that it is better for a business owner to lease then to acquire.