Every business has a life cycle. For a start-up, once the business breaks even and can successfully sustain itself, most probably, it would have outgrown its current space. This in turn leads to the next significant decision for the entrepreneur, which is to own or continue leasing their next premises.
Investing in a commercial building can deliver immediate financial and operational advantages while simultaneously building long-term wealth. However, the decision between owning and leasing is a multifaceted one. Factors such as the nature of your business, future goals, location, and personal preferences must be meticulously examined, as they have the power to either propel or impede your business’s growth. Nevertheless, the most critical determinant of an entrepreneur’s ability to maintain ownership is the financial stability of the business, in order to sustain ownership of the property.
A business case for owning commercial property
Owning a business premises offers numerous advantages over renting. To begin with, it affords you greater control over the space. In contrast, renting ties you to the rules and regulations set by the landlord or leasing agent, thereby restricting your ability to provide tailored workspaces for your staff and deliver services to your clients. Owning commercial property gives you more freedom to keep adapting your business space to suit your growing business. You can customise the premises to meet your business needs. Manufacturers, in particular, need significant flexibility to customise their facilities.
Another advantage is that when you own your business premises, you can sublet any extra space for supplementary rental income. This additional revenue will go a long way in subsidising your loan repayment, if you had taken a loan to acquire your premises, or in offsetting some overhead costs. However, the uptake of the rental property will depend, among other things, on the location of your premises.
Should the business owner require additional capital to expand the business, they have the option to refinance the property. The business owner will not be subject to an increase in rent and other fees.
There are, however, some challenges to ownership instead of leasing. The business owner is directly responsible for the maintenance and management of the building. Managing tenants can be a tedious task, and more often than not, the business owner has to hire professionals to do the job.
Namibia Post-COVID Property Prospects: A New Dawn and a Few Storms
The global property market faced a substantial impact from the COVID-19 pandemic, resulting in a temporary slowdown in Namibia’s real estate sector. This slowdown was noticeable through reduced transaction volumes and a limited number of construction projects, primarily attributed to decreased sector funding due to heightened risk aversion, elevated interest rates, and pandemic-related uncertainties.
In this changing landscape, the commercial housing market exhibited a mixed response. Those involved in warehousing and logistics witnessed significant gains, largely driven by the surge in e-commerce during the pandemic. However, the rise of remote work, with companies shifting to home-based work arrangements, led to a reduced demand for commercial properties, consequently affecting pricing.
Encouragingly, the Namibian economy is steadily recovering from the pandemic’s impact, with most sectors displaying robust signs of revival. According to Statista, the real estate market in Namibia is projected to grow at an annual rate of 4.14% between 2023 and 2028. This projection aligns with data in the August 2023 report from the Namibia Statistics Agency.
A noteworthy indicator of this recovery is the Commercial Buildings Completed Index for August 2023, which surged by 100% compared to the previous month, signaling significant growth in the completion of commercial buildings in Windhoek. Moreover, on an annual basis, the index witnessed a substantial expansion of 300.0%.
These developments, coupled with the relatively lower prices of commercial properties and increased construction activity, present remarkable opportunities for business owners to secure locations or properties below market value. It is evident that the industry is gaining momentum and rebounding after the challenges posed by the pandemic.
In many cases, entrepreneurs can only acquire property when they possess the necessary financial means and resources. To access such opportunities, entrepreneurs often need to turn to financial institutions to secure the required funding.
Business Partners International (BPI) provides private debt and equity financing to small and medium-sized enterprises in East and Southern Africa. BPI is committed to supporting entrepreneurial growth by providing financing, specialist sectoral knowledge, mentorship, and technical support services to viable businesses.
Differing from conventional funding sources, BPI places a strong emphasis on understanding the unique intricacies of each business and customizes financial offers accordingly. BPI’s offerings encompass property finance in the form of private debt or equity financing in the form of joint venture finance.
From Zero to Bricks and Mortar: 100% Financing for Business Premises with Flair
Under Property Finance, BPI provides business finance ranging from NAD1.5 million to NAD15 million, which is repayable over five to ten years. The following standard documents are required: a business plan, the annual financial statements of their business, and details of the proposed property that they intend to buy. The entrepreneur can apply to obtain a 100% loan to purchase (LTP).
Under the Property Joint Venture Finance option, BPI co-invests along with the entrepreneur, who might be expanding their property portfolio. In order for a business to qualify under this segment, it must present exceptional growth and/or return on investment.
Originally published by: Property News on 26 Oct 2023.