The Effect of Load shedding on Commercial Property
Stage 8 load shedding a possibility
With Stage 8 load shedding now a real possibility as the country is already battling with Stage 6 power cuts, these are dark days for the national energy provider. While it is difficult to forecast precisely how and when load shedding will be implemented in future, it is expected to remain and worsen in the short term.
The South African Property Owners Association's (SAPOA) latest survey shows the impact of planned power outages on the commercial real estate industry with most commercial property (CP) landlords expecting planned power outages to worsen and that 28% of commercial property firms are at risk. It also showed that 90% of commercial property owners believe load shedding will worsen in the near future.
TITAN Property Group - The right choice
However, TITAN Property Group's (TPG) latest article by market expert and CEO of TPG, Raul Flores, shows how South African CP owners are currently outperforming the rest of the global market, even during economic volatility and power outages https://www.titan.co.za/news/sa-commercial-property-returns-global-best/. This is yet again, proof of why it is important to have estate market specialists such as TPG on board to survive the impact of load shedding.
Impact of load shedding
More than 40% of CP owners reported that these planned power outages are having a "serious impact" on their businesses and 25.42% that it is having a "moderate impact". Only 1.69% of SAPOA members reported that outages have had "no impact" on their businesses. The survey results also revealed significant additional costs landlords are confronted with, directly related to the power cuts. Eskom's inability to provide the country with sufficient energy to conduct proper business is estimated to be responsible for more than R10 million monthly in direct costs, such as additional fuel costs to run generators. Other indirect costs include lost labour productivity and damage to machinery.
This graphic shows the financial costs of load shedding on CP owners. (source: SAPOA)
More than 83% of businesses registered with SAPOA, indicated they had diesel generators and 49.15% had solar energy solutions to combat planned power outages, suggesting that many businesses have both diesel generators and solar solutions. Others have installed inverters at great cost. The impact of shedding is also resulting in significant indirect costs, such as lost labour productivity and damage to machinery.
Estimated indirect load shedding costs per month. (source: SAPOA)
Reported other impacts on everyday service delivery:
- 38% have experienced electrical damages to equipment;
- 46% spent excessive capital on infrastructure to minimise its impact;
- 23% reported poor staff morale and/or an unproductive workforce;
- 5% experienced a negative impact on sales;
- 69% have had vital office equipment, (printers, internet connections and phones) offline;
- 92% had to work overtime;
- 92% have experienced rental reversions and
- 08% reported disrupted delays in delivery times and/or deadlines being missed.
The survey showed 61.18% of businesses experiencing daily outages and 34.12% a few times a week. Last year, 84.71% of surveyed businesses had no power for between two and four hours, with 10.89% impacted for between five and eight hours and 4.71% for less than two hours.
Its still worth investing
Once again, South African CP investors have shown how to ride out the increasing dark economic predictions and not only how to survive, but thrive. The property market is predominantly guided by the state of the economy and, at its very core, planned power outages are damaging to the investor sentiment. However, with experienced and knowledgeable realtor agents, this bleak outlook can be turned into potential positive financial returns.
Call TITAN Property Group today to gain insight into the market and how to seize viable opportunities.