Route 21 Corporate Park

Expected improvement in commercial property sector delayed…

While it was generally expected that there would be an uptick in the commercial property sector in the fourth quarter of this year, it seems this recovery will now be delayed until the first and second of next year – at least.

So said Org Geldenhuys, managing director of property development and management company, ABACUS DIVISIONS“There has been a moderate improvement in the property market over the last six months, as was recently highlighted in the SAPOA/IPD South African Biannual Property Indicator to June 2012. Despite this heartening fact, it is unlikely that the uptick that was expected during the last quarter of this year will occur due extenuating circumstances, such as the high level of council costs facing landlords.”

According to the recent SAPOA report – which was measured on a sample of assets just under R105 billion (which is estimated to be 60-65% of the commercial investment property market in SA) -property investment overall delivered a total return of 5.9%.

Exacerbating the overall situation is the fact that some operating costs – such as general council bills – have increased above the CPI rate. “Property rates are now increasing year-on-year at double the inflation rate – and the ever-increasing charges from an embattled Eskom are also taking their toll.”

On top of these increases, landlords are sitting on vacancy levels that are still too high – and are not coming down as fast as they had wished for.

He said many landlords – in an endeavour to get vacancy levels down – are offering the market “special short term offers” on office space.

“A growing number of landlords are trying to roll with the punches by offering tenants special deals as a way to get revenue up going into the festive and New Year seasons. We are seeing this in a number of office parks, such as Highveld Techno Park in Centurion, which is on a special drive to lure tenants during the next few months with really attractive rental offerings.”

There is also mixed sentiment on whether the fall-out from the recent global meltdown is really over, or if the markets – including the commercial property market – are still showing “hangover symptoms”.

“People and companies are looking for bargains and, if they do have any cash, they are sitting on it because they are waiting to see how the market is going to move – whether it is up, down, or sideways. There is still a lot of uncertainty in the air, both in South Africa, and globally. This is not helping any recovery. This cautious sentiment means that recovery will be muted because people are not prepared to make any bold moves. They are definitely erring on the side of caution.”

Marc Edwards, the managing director of Spire Property Management, believes property rentals, particularly in the A grade commercial and retail market sectors, seem to have bottomed out. But it is not certain how much longer the market will remain in this plateau before showing any real signs of recovery.

“All the signs are pointing to a much more muted Q4. The hang-over affect of the global recession and rising operating costs – which have really hammered owners – are primarily to blame,” Geldenhuys added.

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