GETTING STARTED
BY AHMED MOTARA
Trends, Returns & 2014
In the commercial market
T
he current environment in which commercial
property operates is characterised by record
low interest rates, low GDP growth, tightly
held higher quality physical assets and income returns
becoming increasingly relevant. In recent years, with
GDP growth trending below 4%, we have seen an
increased demand for the safer asset classes within
the property asset class begin to emerge. This has
manifested in investors increasingly seeking properties
providing certainty in income returns. Capital
returns, while still relevant, have become less of a key
determinant in seeking the ideal commercial property.
Within commercial property, we are seeing investors
continuing to seek the defensive asset classes they
perceive within retail, office and industrial asset classes.
In the retail category, the annuity stream nature and
low vacancies of large retail centres remains in favour,
with the expectation that they can continue to weather
a weak GDP growth environment. Due to their
larger physical size and tenant mix including national
anchors, these retail assets provide high certainty on
annuity income even with a potentially weak consumer
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Commercial Handbook 2013
environment emerging. A trend that also appears to
remain intact is the extension and redevelopment of
existing retail centres, with new centres only being
considered if strong demand by retailers is evident.
Speculative developments are increasingly not in favour.
In the industrial category the past few years have seen
many property companies seek to reduce their exposure
to manufacturing and mini-units. The defensive area
within industrial, from both an income and capital
growth perspective, remains the warehousing and
distribution element. Demand for this type of space
is likely to remain high, with prized assets tightly held
and not often coming up for sale.
Office space continues to represent the largely
problem area in the SA commercial property landscape,
with vacancies and negative rental growth remaining
areas of concern. A negative dynamic continues to be
played out through tenants shifting into higher quality
office space as landlords drop their required rentals and,
in instances, offer rent-free periods when faced with
high vacancies. Higher vacancies in the lower quality
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