Changing corporate practices?

Posted On Wednesday, 10 November 2010 02:00 Published by eProp Commercial Property News
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The “big is beautiful” property practices of the early 2000’s - more branches, bigger spaces, expand at all costs - were harshly exposed in 2007-2009 and there’s been a huge move to the idea of “smaller”


Office space-per-user has been dropping with the more widespread introduction of open plan offices, shared offices, more stringent space design standards and even a bit of teleworking / hotelling (although limited largely to consulting/high-tech firms in SA).

In the USA, IBM shaved over $50 million off annual property costs and dropped almost 200 000sqm of office space worldwide via these techniques; Sun Microsystem’s iWork project help reduce space by 25%.

On the flip side, parking requirements to support this density are gonna go up from the typical 4/100 to 6 or 7bays/100….


In the field of warehousing/distribution, users are increasingly buying into the argument that cubic metres matter as much as square meters – the additional expense of buying taller racking and related hysters to make the most of high eaves often relieves pressure on through-put businesses by allowing higher volume of goods to be processed within the same footprint. 


Given the higher rate/sqm rentals that retailers typically pay, they’re generally better attuned to the “small is beautiful” argument, but the recent consumer spending dip has forced them to re-evaluate even further, cutting redundant space and working hard on category management within stores to ensure every square centimetre is productive. And the impact can be huge – a store that is 10-15% too large (i.e. it doesn’t generate extra revenue from the surplus space) will struggle to be more than break-even.

And not to forget the need to reduce your carbon footprint – between Eskom’s limitations and our “green” consciences, it behoves each of us to “go small” wherever we can to reduce our energy consumption.

My advice: choose to be “great” within your space, rather than simply “big”.  

What to do:

Heard this before? "Our little store isn'ttrading particularly well, but the landlord is holding out promises of big-name new tenants that'll be added to our ailing centre, which will then justify the high renewal rental they're asking for".

Ronald Reagan had a saying "Trust...but verify" which applies neatly to your situation.
Confirm with the new tenants that they are indeed coming to the centre, which location they're taking (closer to your store may be better than further away) and what date they aim to start trading.
If you believe that the new tenants will drive your own turnover, and you don't have an even better opportunity at another centre, then by all means commit to the new lease.

If you're still unconvinced, delay signature until the new traders have opened and you've seen a tangible upward impact on your own sales - you can't afford to gamble with your livelihood.

Last modified on Wednesday, 21 May 2014 17:43

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