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Headspace
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December 2011 (latest edition)
August 2011
SA property market in early stage of recovery phase
03 February 2012
Despite ongoing global economic turmoil the South African property market is entering the recovery phase albeit the early stages. Listed property on the JSE Securities Exchange has continued to outperform other assets in the traditional four classes – bonds, cash and equities. That’s according to the Broll Annual Market Report, a review of the global, continental and local retail, industrial and office sectors.
‘Subdued demand and excess space in the market means that tenants in all property sectors – offices, industrial and retail – have a strong position when it comes to renewals. This will start to change over the next 24 months or so,’ says Malcolm Horne, CEO of Broll Property Group.
Although demand has been subdued, Horne says there are several indicators of an increasingly vibrant market sector. ‘In the office sector a two-tier market is emerging – prime grade and the rest. Gross rentals on prime space, larger efficient floor space which can accommodate open-plan or high headcounts per square metre are holding up. The others remain under pressure, forcing landlords to consider refurbishments in order to compete, or to adjust their rentals. In addition the growing interest in Africa as a destination for many multinational businesses is resulting in a significant uptick for quality retail and office space in several countries to the north. Broll’s leasing teams have experienced the best year in its 37-year history as a result of a strategy to develop a strong research-focussed platform with users of space across all sectors.’
Locally the Gautrain has had an indeterminate impact on the Gauteng property market. The opening of the Rosebank station and the route between Sandton and Pretoria have taken the service offering to a new level. ‘Our findings are that the train and bus services have not necessarily led to a reduction in the use of parking bays in buildings,’ says Horne. ‘Users of the Gautrain now leave their cars at the office from Monday to Friday and only take them home at the weekend. The opening of the Johannesburg Park Station will enhance the service offering and contribute to the transformation of the Johannesburg city centre. Investors are coming to the table, and the CBD is benefiting from a variety of new developments.’
The Pretoria office market has also benefited from the Gautrain. Office buildings around the Centurion and Hatfield stations have become more popular and now have low vacancies. Speculative developments for the 2010 FIFA World Cup are now experiencing the benefits of the new transport hub and vacancies continue to decline.
‘Capitalisation rates for prime properties in all sectors of the market have remained stable and we expect this to continue for the first quarter of 2012. Secondary and major provincial properties however have seen a weakening in capitalisation rates. This is largely due to the higher vacancy rates and a reduction in rental levels.’
In the retail sector, shopping centres remain the main retail sales point, primarily because they have been developed specifically for the business of retail sales, facilities and services. Gross shopping centre prime rentals have remained fairly stable with the exception of Bloemfontein and Durban. Bloemfontein has experienced an increase in gross rentals achieved due to the higher demand for space and an increase in retailers interested in entering that market. With limited stock available, this has led to a reduction in vacancies. Durban, on the other hand, has had an increase in stock coming online over the last 24 to 36 months. Coupled with the downward economic conditions in the area it has led to an increase in vacancies and as a result a reduction in rentals.
Elsewhere in South Africa:
• Vacancies in the Cape Town office market are down to 10% and the market is showing signs of improving.
• Demand in Durban remains stable. The Umhlanga/La Lucia Ridge is saturated, and any land that is released would be at a premium.
The demand for industrial space across the country remains stable. However, the projected economic growth around the King Shaka Airport has not materialised, mainly due to the downturn in global markets and the subsequent knock-on effect this has had on exports.
Elsewhere in sub-Saharan Africa:
• Demand for retail space in Nigeria has increased significantly, driven by the growth in urbanisation and consumerism, and a growing middle class. Some 250 000m2 of new retail space will come on stream during the next two years.
• Ghana has experienced an increase in demand. Accra Mall, for instance, attracts more than 7 million shoppers a year.
• The Malawian market has seen an increase in new supply coming online, while demand remains stable.
• The Namibian retail market has experienced a decline in new retail space coming online while demand and sales remain stable. The industrial market, on the other hand, experienced an increase in demand, supply and sales.
‘Overall, the outlook is positive and cautiously optimistic,’ Horne adds. ‘The South African property fundamentals remain strong, landlords and tenants have become more educated about the costs involved and the pressure is on all to find effective means to reduce operating costs. I believe 2012 will be a year filled with exciting product offerings and new ways to look at property.’
View report: PDF / Digital Booklet
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