Real Estate Investor Magazine South Africa September 2013 | Page 58
PROPERTY PROFESSOR
ACHIEVING SOCIAL AND ECONOMIC
RETURNS IN THE SOUTH AFRICAN
PROPERTY MARKET
PROFESSOR FRANÇOIS VIRULY
François Viruly is a property economist with
over twenty years’ experience in the analysis
of the South African property market.
Professor Viruly lectures in Urban Economics,
Property Development and Portfolio
Management at UCT in the School of
Construction Economics and Management.
C
ities and property developers across
the globe have become acutely aware
that socially sustainable building projects
provide attractive financial returns. For practitioners
in the built environment it means supporting projects
that are based on appropriate social, economic and
environmental benchmarks. Moreover it means finding an
appropriate balance between private and public sector interests.
For South African property investors the steep rise in building operating costs
continues to place negative pressures on net operating incomes and returns. This has
also increased the desire to seek construction methods and property management
approaches that improve operating cost efficiencies. In a typical commercial building
some 50% of operating costs is attributable to rates and taxes and other utility costs
such as electricity and water. Moreover some 80% of the carbon emissions created
by a building occur during the operating life of a building. Until recently investors
have tended to pass operating cost increases onto tenants. But tenants have
become reluctant to absorb such costs and related increases. It has also not become
uncommon for tenants to sign “green leases” that require property owners to meet
clearly defined operating efficiencies. To meet such changing tenant requirements,
South African property investment funds have been undertaking renovation
projects that have seen retrofitting of buildings and significant increases in electricity
efficiencies of between 30% and 40%.
For the developer, undertaking a property development with a significant green
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