Frequently Asked Questions
What is P-Grade Office Space?
P stands for premium and SAPOA defines P-grade office space as top-quality.
What is A-Grade Office Space?
The SA Property Owners’ Association (SAPOA) defines A- Grade office space generally not older then 15 years or which has had major renovation, has high- quality modern finishes, air conditioning, adequate onsite parking and is getting rents near the top of the range.
What is B-Grade Office Space?
Older buildings with accommodation and finishes close to modern standards as a result of refurbishments, with onsite parking and air conditioning.
What is C-Grade Office Space?
Buildings with older finishes and services that may have onsite parking and air-conditioning.
What is Gross Lease?
A lease where the tenant pays a single monthly rental, inclusive of all costs. With this type of contracts, the landlord bear risk of increased operating expenses.
What is Net Lease?
A lease with a provision for the tenant to pay, in additional to rent, certain costs associated with the operation of the property.
What is generally included in operating costs?
Operating Costs are all the costs incurred by the landlord in maintaining and running the building. These costs generally include the following:
- External cleaning including windows
- Cleaning of common areas
- External maintenance of building
- Maintenance of the garden areas
- Insurance of the building against usual risks
- Maintenance of lifts
- Meter Reading Charges
- Property Management and administration fees
- Provision of consumables to the toilets
How are escalations determined?
There is a widespread misconception that the escalation rate charged by landlords is some form of inflation protection. It is not. It is a contractual mechanism to ensure rental growth. The fundamental reason behind this mechanism is to provide comfort to the investor that he or she will obtain an adequate investment return. An investor into real estate is investing for a total return and that total return must be attractive enough to justify the additional risk which is perceived to accompany the investment.
How does one determine exact space requirements?
As a general rule of thumb, one can estimate requirements at ±20m² per person. This includes common areas within your offices such as the reception area, boardroom, meeting rooms and kitchen area. This varies according to more specific requirements and effective space utilization. Trussard will provide a full space analysis through an interior design firm in order to determine your exact needs.
What are the considerations in the purchase vs lease debate?
- Personal control over the property
- Security of Capital
- Positive/Negative operating yields
- Leverage for further lending
- Cash Flow liquidity for gearing
- Management Burden
- Legal complexity
- Inflation, deflation and real estate cycles
What is Rental Concession (Tenant Incentive?)
Concessions a landlord may offer to a tenant in order to secure tenancy.
What is Capital Gain?
Increase in capital value of a property on which tax is payable, either when sold or deemed by tax rule to be incurred.
What is Capitalisation (Cap) Rate?
A ratio of the relationship between a year’s cash flow and the present value of the cash flow. The rate at which the net income of a building is capitalized into perpetuity to derive its market value. Cap Rates are the property equivalent of the forward earning yield of listed shares.
What is Decentralisation (or suburbanisation?)
Alternative commercial nodes that have formed as a result of city growth and urbanization.
What is Depreciation?
As properties age, they lose value because of “wear and tear” and “Obsolescence”. The Building’s value depreciates as a result.