13 Dec 2012
Rising transportation costs, including fuel and the proposed e-tolling, traffic congestion and the need for ease of access are just some of the relevant factors which impact on selecting a suitable location for a business, says David Reid, investment sales broker for JHI Properties.
Reid says the physical location of a business is extremely important, because critical to the success of any company is the ability to effectively reach its desired target market.
In turn, this involves supply and demand – whether this relates to products or services.
Suppliers need to be able to supply with ease, and markets need to be accessible in order to meet demand and these are influenced by factors, including awareness of the product or service on offer.
“However, location has a major impact on all these, even to the extent whereby having good exposure or visibility to passing traffic provides an ideal marketing opportunity, which can save on advertising costs.
Being in an acceptable location close to suppliers and customers or clients, having ease of access to highways and key transport routes, close proximity to public transport - particularly for staff, good overall security and having sufficient secure parking, all play a significant role in the choice of location, he explains.
“Depending on the type of business and its target market, comfort factors such as general aesthetics and quality of the building may be relevant.”
Furthermore, it may be advantageous to be situated close to destinations that have synergies or something in common with the business, for example businesses offering financial services tend to be within easy reach of each other, in well-known nodes.
This depends on the business, and some businesses may prefer to be close to their competitors because of these nodal factors. Consideration should also be given to whether competitors situated close by can be bypassed by customers, so ease of communication with target markets is an important factor.
“You may find banks for example in the same node, or retail businesses choosing to be in high traffic shopping centres.
“Restaurants and distribution centres are good examples of businesses which need to be in the right location,” he says.
He points out that the immediate and long-term consequences of being situated in the wrong location for the business should be considered.
This can result in customers reviewing their source of supply, for example, going elsewhere, staff may experience transport problems or there may be a lack of suitability on the part of the new location, resulting in low morale, and a danger that not all the factors that affect the feasibility of the business are taken care of.
In the long run, if the business location proves over time to be a bad one, sound advice is to rather get out sooner than later – if you are an owner-occupier put the property on the market even if it means a loss and do what is right for the business and its long-term sustainability.
If you are renting you need to consider the length of the lease and what your options are for relocation.
Some businesses prefer to rent rather than purchase as it affords them far greater flexibility should their business expand or if their requirements may change in the future.
A courier company, for example, may well prefer to rent space - a factor which gives them the flexibility in order to relocate if needed, in order to be in the right location, says Reid.
“If your business is situated in an area that has become run down owing to a lack of service delivery, you need to try and mitigate the problem.”
Reid says if service delivery is poor, get together with other businesses in the area and be pro-active in trying to find a solution.
In rejuvenating a location, one may find a number of landlords in an area or precinct are willing to join forces and perhaps set aside some of their proceeds from rentals for rejuvenation.
Good examples of this are The Main Street precinct in Johannesburg and Braamfontein, while the successful pedestrianisation and rejuvenation of Cape Town’s central city is a further case in point, he says.
Meanwhile, Seamus Daly, leasing and sales broker at JHI Properties in the Western Cape reports that the vicinity of Cape Town International Airport is becoming popular among light industrial users because of location.
Daly explains that underscoring the importance of accessibility of location, a fully tenanted, light industrial property in prime position in Airport Industria close to Cape Town International Airport, has been sold for R6.25 million.
It comprises eight individual self-contained, modern industrial units of approximately 240 square metres each and has been acquired by a South African investor who owns a number of industrial properties in the Cape Town area.”
Airport Industria is ideally situated just off the N2 on the one side (leading to central Cape Town) and Modderdam Road – which links to the city’s burgeoning Northern Suburbs – on the other.
Known as Sky Park, this property is in a prominent position on a corner site on Manhattan Road, which is the main road through the industrial area.
Fully fenced and with a gross lettable area of 2 067 square metres, the property is well maintained and in excellent condition.
A relatively new area, Airport Industria is extremely popular, and for this reason investment properties seldom become available, he says.
It provides good access to all key routes in and around Cape Town, and with only 60 percent coverage on a site, properties cater mainly for ‘clean’ businesses such as warehousing and distribution.
Daly says they have also concluded a five year lease on behalf of a listed company for a 3 500 square metre turnkey development at nearby Airport City, at a total lease value of approximately R15 million.
Occupation of the property is in November 2013. Airport City is a newer, light industrial area located on the airport side of Borchards Quarry Road, and is also sought after among mainly medium to large users.
“In this area, where space is normally at a premium, a number of modern warehouses are available to let, ranging from 2 000 to 3 000 square metres.”
Offering facilities such as multiple loading doors, dock levellers, six to eight metres in height clearance, excellent office accommodation and large yards, these are ideal for logistics, distribution, materials handling and airfreight companies.”
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