Commercial tenants are feeling the squeeze, with high rental and operating costs emerging as the biggest hurdles in their leased premises.
According to the latest TPN Credit Bureau report, which tracks tenant payment behaviour across the property market, costs remain the top concern. Rental obligations (32%) and operating expenses (14%) together account for nearly half (46%) of the challenges cited by tenants.
“Across nearly all sectors, high operating costs are a major pain point, particularly for retail and office tenants, underscoring the ongoing strain of day-to-day expenses,” the report noted.
The next most pressing challenge stems from dependencies on government and municipal services. Load-shedding and ageing infrastructure continue to weigh heavily on tenants, adding another layer of operational uncertainty.
Last year, the South African Property Owners Association (Sapoa) operational cost report highlighted similar pressures, with electricity and property taxes driving more than half of total operating cost growth.
While many of these challenges lie beyond tenants’ direct control, their effect on business continuity is undeniable, according to the TPN report. Companies are being forced to allocate resources to navigate rising costs and infrastructure shortcomings, ensuring operations stay on track despite factors outside their influence.
‘Utility costs a significant barrier’
“The second most significant barrier is utility costs. Escalating electricity and water charges are putting sustained pressure on operating margins, particularly for retail, industrial and service-orientated occupiers. These costs are largely unavoidable, hard to forecast, and increasingly disconnected from actual usage,” it said.
Industrial tenants are feeling the brunt of power disruptions, with 18% citing electricity supply issues as their biggest operational challenge, according to the report.
Storage tenants point to infrastructure and municipal service delivery as pain points, with nearly 19% highlighting poor maintenance and inadequate municipal services as major concerns.
In the office sector, the cost burden of property maintenance is significant, with 20% of tenants citing it as a key challenge, while other sectors report similar pressures at 18%, highlighting the ongoing effect of building upkeep on operations.
Improved facility management and preventive maintenance will be required to address these challenges, especially in the office sector, to enhance the tenant experience, the report said.
Other challenges include access to customers, with low foot traffic emerging as a main concern.
“Tenant growth is being constrained mainly by the economic environment and cost pressures, not operational inefficiencies, highlighting the need for affordability, transparency and supportive conditions,” the report said.
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