Real Estate Investor Magazine South Africa June 2013 | Page 50

SMART MOVES
it becomes viable to redevelop the site for a
large tenant.
The sur vey a lso revea led that annua l
escalations remain 7,5% to 9% although the
latter only for shorter-term leases. Longer
-term leases attract more favourable escalations.
Average land values have shown a marginal
increase to around R1,050/m² (excl. VAT).
The more popular areas being Airport City,
Brackengate and Sheffield Park. There has also
been renewed interest at Capricorn Park in the
Southern Suburbs. Beddow concludes, “Despite
the vacancies in the market we have minimal
industrial buildings for sale. Reasonably priced
buildings tend to sell quickly. “

Optimistic growth
This statement is echoed by comments made by
Erwin Rode about commercial property market
growth. “The South African Property Market
reveals a modicum of good news for the industrial
property market,” says property valuer and
economist Erwin Rode of Rode & Associates.
On a national basis, the yearly growth
in industrial rentals is slowly heating up,
seemingly benefiting from the lagged impact
of declining vacancy rates. “In fact, such has
been the acceleration in the growth of market
rentals in this sector that in the fourth quarter
of 2012, prime rentals recorded a nationally
averaged growth rate of 7%, with the strongest
yearly growth of 9% being achieved in the Cape

Peninsula.” Disappointing, however, is that the
national average still failed to be in excess of
building-cost inflation. “Hence, we are not yet
out of the woods,” cautions Rode.
The news was bleaker for off ice rentals,
still lethargic as a result of generally weak
demand. Notes Rode: “Market rentals in
Cape Town and Pretoria decentralised barely
mustered yearly growth of 3%. Johannesburg
decentralised only managed a measly 1% while
Durban decentralised actually saw rentals
contract by 4%.”

Growing the market through SMEs
Business Partners executive director Gerrie
van Biljon speaking at the Business Partners
seminar in a discusion on how to unlock wealth
through commercial property investment in
South Africa, announced that the company has
allocated R500 million of its annual investment
budget to commercial property.
The investment allocation to properties will
de-risk the company’s investment portfolio.
“The current environment continues to
provide opportunities to acquire commercial
property investments offering reasonable
returns,” says van Biljon. The company plans
to invest predominantly in neighbourhood
retail and industrial properties, as well as select
office space valued from about R5 million up to
R85 million per investment.

INDUSTRIAL PROPERTY VACANCIES
MARCH 2013
Southern Suburbs
14.1%
86,451 m2

Montague Killarney &
Surrounds - 16.6%
101,539 m2

CBD & Surrounds
Incl. Paardeneiland
8.6%
52,489 m2

Bellville, Parow,
Airport - 17.4%
106,273 m2

48

Business Partners also invest in joint venture
deals with other property investors in the same
property categories and continue to finance
SMEs with up to 100% of the purchase price
for owner occupied properties valued up to
R30 million.
Keynote speaker, Marius Muller, CEO of
retail investment property company Pareto,
said that government spending provided an
opportunity for the property sector. This
expenditure would “assist the property sector
in terms of filling vacancies, stimulating new
development and activit y”.“ We therefore
believe that commercia l and industria l
property remains an attractive investment for
entrepreneurs, either as a sound long-term
investment or to secure tenure for their own
business operations.”
Van Biljon says that New York-listed global
commercial property firm Jones Lang LaSalle
recently released research that supports this view.
“Their research shows that there is a shortage of
assets within the South African commercial
property investment market because mature
funds were holding onto prime assets.”
He says that SME owners often believe that
renting premises offer greater flexibility than
ownership. “However, long-term tenancy may
not be secured and the investment made in
improving rented premises may be lost if the
lease cannot be renewed.”
“Property ownership offers not only security
of tenure, but also enables entrepreneurs to
grow their equity. Calculations show that,
by purchasing a property or properties for
their own use, SME owners can save up to
50% on premises costs over a 10-year period,
without compromising the business’s own
cash resources.”
There are still sound investments available
in the current market. “When purchasing
commercial property, research into the location
as well as the funding structure is required
for a business owner to reap the benefits of
ownership,” concludes van Biljon.

Outlying Areas 16.8%
102,712 m2

June 2013 SA Real Estate Investor

Epping, Maitland%
N’dabeni - 26.5
162,016 m2

RESOURCES
Baker Street Properties
Rode
www.reimag.co.za