MARKETS
Commercial Property
in Review
The years most lucrative
Commercial Property Investments
BY MIKE WALTERS
T
hroughout 2014 the commercial property
market was relatively flat from an
intermediary’s perspective. The office space
sector is currently at a national vacancy average of
14%, which is extremely high. This year there has
been gravitation towards smaller sectional title
office space for small and medium enterprises that
have chosen to own or rent their own offices. Small
business rentals in central areas have seen a marked
upswing over the past year, especially in the Cape
Town city centre.
The poor economic outlook, extended strikes,
lack of consistency and availability of electricity
among others is resulting in little or no investment
by business. Added to this, lack of planning,
maintenance of infrastructure and corruption at all
levels of government are making businesses nervous
about the future and investing in the future.
South Africa’s low anticipated growth rate also
means no, or little, increase in demand for office
space and therefore fewer new leases will be signed.
Businesses also seem reluctant to make long term
commitments. This means that landlords that are
heavily weighted in the office section will continue
to go out of their way to do renewals, sometimes
offering discounts. In light of this, not much churn
(tenant movement) is anticipated.
It is expected that there will be more downscaling
in the office sector in the year ahead as demand
increases for smaller premises. Mobile entrepreneurs
and business centre set-ups in the right areas offering
the right formula will be busy and in high demand.
Industrial properties on the other hand are
performing moderately well, a trend that is expected
to continue into the New Year. Industrial properties
are currently running at a national vacancy average of
6
Commercial Handbook 2016
4% which is average to low. Sectional title warehouse
space is in high demand, and this is especially true
for smaller business owners who want to be located
close to corporate hubs or commercial nodes and
residential areas. Good investment grade properties
in the industrial space are in high demand and
properties with sufficient power supply with good,
long-standing tenants are particularly sought after.
There is also a strong demand for smaller miniunits measuring between 250m2 – 500m2 in secure
sectional title parks.
It should be noted that infrastructure in the older
industrial areas seems to be falling apart, and many
areas are no longer secure. For this reason, investors
looking at purchasing in this space during 2015
should look towards units in secure sectional title
parks. Newer, secure areas in Johannesburg which are
in high demand include Strydom Park, Lazer Park,
Linbro Park, Longmeadow and Greenstone.
The retail sector of the commercial property
market has been performing moderately, however
borderline groups will continue to be under pressure
in the year ahead. Rural and neighbourhood
shopping centres seem to be where the growth is at,
and neighbourhood centres are expected to continue
performing well into the coming year.
As with any property purchase decision, due
diligence needs to undertaken when purchasing a
commercial property to ensure a viable investment.
Commercial property usually requires a higher capital
outlay than a residential property purchase, but can
also offer much higher returns should the investment
be a prudent one. In this specialised market, investors
would do well to work with a respected commercial
property broker they can trust.
www.reimag.co.za