Tougher times loom for commercial property

Posted On Thursday, 24 July 2008 02:00 Published by
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The retail, office and industrial properties sector is holding up better than residential property in unfavourable economic circumstances.

The retail, office and industrial properties sector is holding up better than residential property in unfavourable economic circumstances.

Consensus is that the low borrowing levels among unlisted and listed commercial property funds make them resilient in this market.

Nevertheless, this does not mean listed property companies and funds do not face any risks.

Those with large exposure to retail property must have some concerns about the risk of defaulting tenants who are feeling the squeeze of a drop off in consumer demand.

But this is unlikely to be reflected in the batch of financial results being reported in the next month by listed property funds and companies.

Analysts are expecting, on average, double-digit distribution growth from those companies and funds.

But they also expect them to moderate their earnings forecasts, because the economy is set for leaner times.

There is a good chance they will also be preparing for an increase in vacancies, particularly in the retail property sector.

One factor favouring listed property companies with strong exposure to industrial property is the shortage of industrial property in SA.

Vacancies are also extremely low, which gives the companies with large industrial portfolios some breathing room.

But there have also been several media reports pointing to a danger of a manufacturing slowdown in SA.

If this happens the influence would definitely be felt by listed property companies.

There is also as shortage of office space in SA, but a slowdown in the economy could halt business expansion.

This would affect the take up of office space.

Source: Business Day

Publisher: I-Net Bridge
Source: I-Net Bridge

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