By: Natasha Archary
Badly run municipalities are affecting the demand for commercial property, and could have a devastating knock-on effect on economic growth.
John Jack, CEO of Galetti Corporate Real Estate joins Gugulethu Mfuphi on Kaya Biz to share some of the effects and signs of badly run municipalities.
Jack shares that just like residential property owners want to buy in a safe, well-run, aesthetically pleasing area, so to do commercial property owners.
“It’s similar with commercial real estate where tenants want to operate a business and get clients in a nice safe environment.
Think about a restaurant for example, it’s the same thing.
So, when you get a number of infrastructure failure, dilapidated infrastructure, then the tenants start to move on from these areas, and look for areas with more prosperity, security and potential business opportunities.
When this happens, then landlords are less able to afford the property because you have fewer people paying for these buildings, and landlords don’t want to spend money upgrading these buildings, especially when they can see there’s no room for return on investment.
So, there’s this vicious circle which is affecting commercial property and that’s service delivery in municipalities.”
Water issues, potholes, loadshedding, crime, homeless people sleeping outside commercial spaces, it’s all a bleak picture for business owners, and while there is potential in the city, property values are being affected by these factors.
Badly run municipalities affect commercial property demand by:
- Decreasing property values
- Loss of investor confidence
- Higher vacancies
- Landlords have to spend more on private services
Listen to the conversation on Kaya Biz:
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