Commercial Guidebook | Real Estate Investor Magazine Commercial Handbook | Page 8

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