Confidence is going to be key to reignite
South Africa’s commercial property market,
and now that the elections are over, it is
hoped this might be achieved.
The commercial market is, however, facing
challenges, says Mark Latham, managing director
of Pam Golding Commercial Africa. These
include over-supply, limited rental growth and
occupiers looking to reduce occupancy costs due
to the difficult economic conditions.
“Hopefully now that the elections are over,
confidence can be restored and we can focus
on growth which will have a direct result on
demand for commercial real estate.”
More movement is definitely expected in the
commercial property sector with the elections
completed, says John Jack, chief executive of
Galetti Corporate Real Estate.
“During the lead-up to the elections,
investors were wary of an upset and, given the
geared nature of the asset, possible significant
capital loss.
“With increased political clarity and the
elections out of the way, we can expect
investors to transact again, which will be
a much-needed shot in the arm for the
commercial property sector,” says Jack.
Along with decreasing property vacancy
levels, he says the election results should yield
a positive capital inflow of foreign investment
and bring stability to the interest rate.
Modern office space is sought-after by tenants and should be considered by investors. Picture: Supplied
“We can expect prices across the
commercial property sector to rise while yields
improve over the next 18 months. This will be
driven by increases in investor sentiment and
occupier confidence, causing more movement
in the sector.”
Assuming President Cyril Ramaphosa
remains at the helm of the ANC, Jack believes
there will be improved business confidence
due to his “pro-business, pro-capital”
narrative.
This will lead to occupiers taking steps to
actively invest in or expand their operations,
which directly impacts on demand for space
and, therefore, the entire commercial property
sector.
However, there is usually a lag period which
would mean any impact on take-up would be
seen only in about six to 12 months.
“We did, however, see an immediate
uptick in inquiries for space as soon as the
elections started to show results, which
were largely in line with expectations.”
For those who had been holding out on
investing in commercial properties until
after the elections, Latham says opportunity
now exists.
“Asset prices have been discounting due
to falling demand and increased vacancies,
which has resulted in competitively priced
assets coming on to the market across all
asset classes, office, industrial and retail.
“We are also seeing realignment of
portfolios and the subsequent disposal of
assets that are surplus or non-core to the
portfolios.”
Advising investors, he says the
fundamentals will still apply when making
decisions, and good quality buildings
in good locations will “always be in
demand”.
Location continues to be a key factor
in the success or failure of a commercial
property investment, agrees John Whall,
chief executive of Heartwood Properties.
“Tenants typically want their office
premises to have exposure to highways
or main arterial routes with easy access,”
Whall says.
In addition to sufficient secure parking
and modern design, tenants are also
increasingly looking for green design
elements as these offer long-term
reductions in operating costs.