Until now the residential property market has been the main focus for foreigners. This is expected to change, especially if the commercial investment property sector records another solid performance this year.

According to the annual index published by SA’s commercial property association, Sapoa, and the Investment Property Databank (IPD) SA, the sector delivered a total return of 23,4% last year and is expected to be the top performer out of 14 countries measured by the IPD.

This will be the second year that SA is the top performer. In 2003 a total return of 15,3% was recorded by SA, the highest out of the 14 countries tracked.

Other countries measured by IPD are Ireland, UK, Portugal, Canada, France, Spain, Norway, Denmark, the Netherlands, Finland, Switzerland, Germany and Sweden.

The UK is second behind SA with a total return of 18,3%, recorded last year.

Canada recorded a total return of 12,9%, Ireland 11,5% and Norway 10,4%.

The IPD database includes the property portfolios of South African-listed property funds, institutions, pension funds and private portfolios.

Stan Garrun, MD of IPD SA, says it hopes to get either Finance Minister Trevor Manuel or another high-ranking official to speak at the IPD-Sapoa Investment Conference to be held in November this year, in order to encourage foreign investors.

"We want to get government in to encourage foreigners to favour SA as an investment destination because the level of returns are there. We need to convince them of the security of investment in SA," says Garrun.

He says the conference will have two top foreign speakers, and international companies are expected to send representatives.

Garrun says IPD would like to see foreign investors investing in the commercial property market in SA. "There hasn’t been a lot of investment (from foreign investors)," he says.

He says the returns shown "should encourage foreign investors to invest either directly, which is where the returns have performed so well, or through the listed property sector, which is delivering phenomenal returns on the stock market".

Simon Fairchild, director of IPD in the UK, says many large organisations and companies throughout the world are looking for "opportunistic returns" — something he says the South African commercial property market is offering.

He says that if SA manages to record another positive result for this year, an investment in the country’s commercial property market will start making sense for foreigners.

Another factor in SA’s favour is the existence of an IPD database with access to information for the past 10 years, says Garrun.

"The first thing an investor looks for when it comes to commercial property in another country is an IPD database. It gives accountability and respectability to the market in that country," he says.

Garrun says the amount of property in the IPD database in SA has also increased dramatically over the past eight years. When IPD was established 1997 it represented about R20bn of property, and has grown to R75bn.

Garrun is expecting a number of newly listed property funds to join the IPD database this year.

Colin Young, fund manager of Old Mutual’s South African-listed property funds, says he has seen signs of foreign interest in the local property market. "I’ve seen a number of overseas investors who have expressed interest in … the fixed property market and listed property," says Young.