Are medium-sized South African businesses doing enough to align themselves with the right real estate advisor?

Dennis Helyar, Head of Commercial Leasing at JLL SA, explains how this decision can have a real impact on your business’ bottom line.

March 19, 2018

One of the biggest mistakes small to medium-sized companies make when seeking new office space is the failure to align their real estate decisions with their overall business strategy. It can have far-reaching operational and financial implications if your real estate decisions are not drawn from a strategic approach.

While large, global corporates rely on entire departments to manage their real estate decisions, the reality, for smaller businesses, is that these decisions can be equated to no more than a shot in the dark.  All too often junior management is tasked with the job of finding appropriate office space without a clear understanding of the corporate objectives. Website platforms may offer potential property solutions, but these may not necessarily be the right ones for your company. In addition, there are limited barriers to becoming a real estate practitioner in South Africa and what often ensues is a haphazard approach with multiple brokers proposing various properties in a hit and miss scenario.

The problem: advice loses its neutrality.

When you consider that real estate is probably the second highest controllable cost after salaries, two things become critical for businesses looking to take up space in the market:

  • Have C-suite representation on the project team
  • Appoint a professional to offer neutral advice in a controlled and measured approach

Before embarking on a property search, companies must leverage off the expertise of their real estate advisor. That way, you should expect substantially more than just a list of properties. With a professional in your corner, you can rest assured that a key component of the process will be the strategic alignment between business objectives and associated real estate. This calculated approach ensures a solid understanding of the overall real estate strategy before going to market.

Whether leasing or buying, the real estate transaction process can be complex and there is an inherent need for market knowledge, financial expertise and negotiation strategies. Aside from property itself, a multitude of additional factors come into play, for instance:

  • Current vs future occupancy requirements, and future proofing against business contraction/expansion
  • Regional geographical and nodal analysis, staff locality and traffic impact assessments
  • Financial review of current budget, and analysis of future expectations
  • Evaluation criteria for selected properties
  • Key negotiation strategies for best case outcome for the business
  • Legal expertise and execution of contractual obligations between parties

The right real estate advisor will also have the support of a strong regional/global network, with access to a range of property portfolios from private institutional landlords to large listed property funds. They would also be able to assist by integrating other services, like design, fit-out and project management, as part of a seamless process.

Commercial real estate decisions are some of the most important decisions that a business can make. It therefore makes sound financial sense to align with an experienced professional who can manage the real estate process with all its risks and complexities while you focus on your core business.

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