Commercial and industrial property fundamentals are as good as they have been for many years, and in most locations demand exceeds supply across most sectors of the market.
Gerald Leissner, CEO of ApexHi Properties, comments that the retail market may be near the top, with rentals in high-demand metropolitan areas starting at around R150/m² and rising to R200/m².
"In smaller towns, rentals are in the R40/m² to R50/m² range," Leissner says.
Office rentals have tended to lag behind the overall commercial and industrial rental surge and, therefore, from an investor's point of view, office space is the most interesting at present.
Prime office space is currently attracting R100/m² to R120/m² gross and rentals are likely to rise at 10% per annum for the next few years.
Turning to industrial space, Leissner says there is far more demand than supply for both small and large
units.
"In the main, tenants are looking for storage and distribution centres in the major metropolitan areas. People are looking for facilities with up to 50,000m² and rentals have doubled in the past 24 months.
"For new space in good areas, rentals are around R30/m² to R35/m²," Leissner says.
Norbert Sasse, CEO of Growthpoint Properties, says the company is bullish on the commercial and industrial property market.
"The industrial property sector is performing particularly well at the moment. This is followed closely by the office sector.
"Nationally, vacancies in the industrial sector are at an all-time low. Given that vacancies are below 2%, this sector is effectively fully let and demand across the board exceeds supply. Rentals are firming substantially,? Sasse says.
He reports that tenants who signed leases three to four years ago at market-related rentals are facing increases of between 15% and 30% on lease renewals.
Neil Gopal, CEO of the South African Property Owners Association, says the residential property market has had a good run in recent years and people who did not buy three to four years ago may now face problems entering the market.
However, there are still opportunities in the commercial and industrial property sector as prices continue to rise and rental growth is strong.
?Commercial and industrial property is on the upward swing and economists say this should continue as South Africa is likely to continue growing for another 10 to 15 years.
"However, external factors such as oil price increases can affect this scenario," Gopal says.
Lynette Finlay, CEO of NAI Finlay, says the reported performance in all sectors of the property industry is resulting in everyone chasing the acquisition of property, and yields are spiralling downward.
"Even properties that would not have seen the light of day in the past are being touted at ridiculous yields - and they are being snapped up at these unaffordable yields.
"Listed property companies are chasing these properties in an attempt to bulk up their portfolios," Finlay says.
She adds that available property is fast running out for investors.
Therefore, the question arises as to when current yields on the local market will cause a focus on international yields.
"We should be at this point," says Finlay. "However, South African companies, as a whole, are not yet at the maturity level to consider global investments. This could be to their detriment as South Africa cannot sustain the kind of growth that properties are expected to yield."
Business Times
Publisher: I-Net Bridge
Source: I-Net Bridge
