And today I’m going to do exactly that again; this time with business.
I have previously wondered out loud about the numerous empty shop fronts and office space in Cape Town.
I find it especially curious considering that there appears to be a constant stream of construction sites laying foundations for new office blocks.
I find it incomprehensible that offices are standing empty, while companies are constantly moving into new office spaces.
But what confuses me even more is business vacating premises on a regular basis.
This thought struck me again as I read about the possible closure of several Edcon businesses, including Edgars, Jet, CNA and Boardmans stores.
Edcon has denied most of the weekend reports, saying they are in fact finding new capital from owners and investors, to keep the business going and to prevent job losses.
The original newspaper report said that Edcon had written to some of its landlords, asking for a “rent holiday,” meaning they would operate rent-free until their balance sheet improves.
According to the report, they also offered a 5% stake in the business. It’s this nugget of information that had me nodding in a bit of self-righteousness.
I remember a conversation I had with a real estate “expert” many years ago, while I realised how expensive it is for some businesses to have premises inside certain malls.
In some instances, I am talking many tens of thousands of rand for a small business to operate inside a well-known mall.
It actually blew my mind thinking about all the overheads that still had to be covered on top of that rent. So I asked, “instead of demanding such fixed high rentals and annual increases, why don’t landlords rather settle for a percentage of turnover?”
The real estate person looked at me like I had lost my mind. But when I raised it again with another expert, he thought about it for a bit and agreed that it would make a lot of sense in a tight economy.
Instead of fixed rental, which can cripple a business and cause great anxiety, I’m proposing a symbiotic relationship where businesses sign over say 10% of their turnover to the landlord.
In this way, the landlord never has to be without tenants.
If sales are down for a prolonged period of time, at least the business owner can focus on sales and salaries, without worrying about the huge rental bill.
And when the economy is doing well and all parties are pulling their marketing weight, then that 10% stake could end up being quite sizeable. Yes, it’s a moving target, but it’s a moving target for everyone.
Right now it seems that the landlords hold all the cards when it comes to the retail economy. And in the case of Edcon, that could translate into thousands of job losses, which the country can scarcely afford. And which, in the end, negatively affects the landlords as well.