Power cuts ‘to hit listed retail property firms'

SA's electricity supply crisis is likely to have the biggest effect on listed property companies that have large exposures to retail property.

Speaking at a listed property presentation yesterday, Evan Jankelowitz, co-head of Stanlib Property Franchise, said the loss of trading during load shedding could not be made up, and the market was already starting to see requests from smaller tenants for concessions from landlords to help them cope with the crisis.

“They are asking for lower rentals and for landlords to ease out on escalations (on rentals).”

He said the market could see a higher level of defaults from small tenants this year.

Although it has been argued by some commentators that national retailers in shopping centres were the most important tenants when it came to keeping a centre afloat, Jankelowitz said the ability of small tenants to pay rent was equally important as they paid a larger proportion of the rental bill than the national retailers did.

Because national retailers take up a large amount of space and draw shoppers, they pay lower rents than smaller tenants or line shops. These line shops benefit from the traffic and therefore subsidise the national tenants.

Jankelowitz said there could be serious ramifications for a shopping centre if a significant number of small tenants could not pay their rents. It was important for property portfolio managers and owners to be proactive and use expertise to help smaller tenants in keeping afloat during difficult times.

“Even if it means concessions in the short term, they are traders and shop owners and their expertise does not lie in providing electricity. That is where the building owners and managers have to step in and protect their top line income. If tenants can't play, they can't pay,” Jankelowitz said.

He said listed property companies with large exposures to industrial property and offices would “be affected to a lesser degree”. The bulk of industrial properties were focused on distribution and warehousing, which were not as electricity-intensive as heavy manufacturing assets. However, even these properties had generators as much of their business depended on power.

Offices offered more flexibility as tenants could operate on laptops and set up meetings around load shedding.

Source: Business Day

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