While researching the state of the commercial property rental market in Hermanus, I stumbled across the story on Facebook about the demise of Mock Turtle, a once-thriving nightclub and dance bar, which was forced into closure due to a string of circumstances. While the story left me somewhat dumbfounded, it stuck in the back of my mind as I listened to tenants and landlords giving their views on the current state of the commercial property market.
As is often the case, when business is tough and people are struggling to keep their doors open, the emotions and sensitivities are at a peak and anything that threatens a business’s viability becomes a challenging conversation between tenants and landlords. What has been highlighted by the conversations I have had, is that there are more than just two players involved. Reading the Mock Turtle story is a must for anyone trying to get to grips with the status of this market and its impact on local businesses.
One consistent message I received is that unless the tenant-landlord relationship is one of partnership and collaboration, there will continue to be dissatisfaction when times get tough. There also appears to be a distinct difference between the relationship with a “corporate” landlord/managing agent versus a private landlord, who manages the relationship with the tenant directly and not via a managing agent.
The two main issues are the duration of a commercial lease and the annual increases that are applied. There are many arguments in favour of both the landlord and the tenant’s viewpoints, but it is apparent that unless there is flexibility in the rules that apply, both parties could come off second best when a dispute over either of these issues arises.
There are landlords who are willing to negotiate with existing tenants who need to downscale their premises in order to survive. There are also those who refuse to consider any flexibility and would, therefore, lose the tenant and sit with an unoccupied space, similar to what is happening at the higher end of the residential rental market. What is really of concern to many is the other factors that are impacting on businesses’ budgets and survival.
A classic example is that of some companies who moved out of the CBD, at quite some expense, to avoid the impact of the planned upgrades and re-establish themselves elsewhere, only to see delays in the upgrades which to this day are anyone’s guess as to what will happen and when. It is all good and well to blame the opening of the Whale Coast Mall on most of the CBD’s woes but it does go way beyond that when differentiating between a large retail chain brand and a small business entrepreneur who wouldn’t be able to afford those rentals anyway.
The net result is a catch-22. The CBD looks lonely and set adrift by day and by night, with the exception of a few areas populated by eateries, art galleries and bars. There is nothing inviting for visitors as they enter town after Gateway Centre and the closer one gets to town, the less appealing it looks. Both landlords and tenants are frustrated as both are impacted by circumstances that they do not necessarily have control over and each blames the other for their respective woes.
When times are tough, the smallest of issues can become exaggerated out of all proportion, whereas during the good times, they are hardly noticed. So whilst conversations of survival are key to sustain the needs of both landlords and tenants, there are times when both parties simply will not agree because of the emotions at play.
The Mock Turtle story (search for the name on Facebook and scroll down to the post) adds another dimension to the conversation and, whilst every story has two sides (or in this case a lot more), one has to wonder to what extent the approval processes for business licences or rezoning play a role in the challenges being faced by business owners and landlords, as delays of this nature affect both parties. If it can happen to an establishment like Mock Turtle, it could happen to any business that is trying its utmost to survive but gets stifled by red tape and procrastination.
Then there is the old guard who, despite the realities of the world, do not get it that progress is inevitable and nothing anyone does is going to change that. So, yearning for the “good old days” when Hermanus was just a holiday town becomes a pointless exercise when a larger percentage of the local population is striving to bring more tourists into town, which will bring growth and change with it anyway.
One can only hope that collaboration and communication between tenants and landlords brings about a better solution for all and that regulatory and approval processes are supportive of business entrepreneurship rather than a noose around its neck.