Exciting times for SA property market
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Exciting times for SA property market
12 Feb 2015
Fasten your seatbelts for an exciting ride with the property sector during a year that is full of potential.
One of the most exciting trends emerging in the property sector is the repurposing of CBD buildings and the re-energising taking place in some South African cities.
This is according to Excellerate Property ServicesCEO, Marna van der Walt, who says they’re seeing a lot of new dynamics coming into play this year, from Chinese Foreign Investment to the repurposing of city buildings around the country, and an opportunistic listed property sector taking its first steps into investment in new asset classes and new African countries.
One of the most exciting trends emerging in the property sector is the repurposing of CBD buildings and the re-energising taking place in some South African cities. These projects are going ahead in areas where there has been some urban decay, says Van der Walt.
“In Cape Town, there is a big move toward greening in the city. Many property developments, redevelopments and upgrades are focused on sustainability and efficiency, and there are many more opportunities for this.”
Another force emerging on South Africa’s landscape is the increased level of Chinese investment, especially in the construction and property sector.
Van der Walt says in 2013 and 2014, several deals were stuck, which will go ahead this year. These investors are injecting funds into urban peripheries and promoting development in the more rural nodes, she says.
When it comes to attracting foreign direct investment (FDI) for the property sector, van der Walt believes that South Africa is at an advantage on the continent, within the present context.
She says property investment in other sub-Saharan African countries may still be on the map, but this will be influenced by each company’s appetite for risk.
There seems to be an escalation of political and religious unrest in certain countries, as well as medical risk in West Africa. This may influence decisions to proceed with certain African investment policies, she says.
However, she believes South Africa remains in a strong position to attract investment. “South Africa has always been the strongest country in Africa in terms of attractiveness to FDI. It attracted 24% of all FDI between 2007 and 2013, and may perform even better going forward.”
She says the World Bank’s Doing Business Report 2015 for ranks South Africa second highest on the African continent for attractiveness and ease of doing business on the African continent.
However, Van der Walt says the year will not be without challenges for South African property, with the dark cloud of load-shedding and the electricity crisis casting a long shadow on economic growth.
Van der Walt says she believes that the star commercial property performer will be the retail sector, which will outperform the office and industrial property in the coming months.
She says consumers are enjoying a little relief with the drop in petrol price, and there’s a decline in South Africa’s household debt service risk, both of which bring welcome benefits for retail. The economy is also telegraphing some positive signals with improving exchange rates and a better trade balance.
The manufacturing and industrial sector will remain under pressure with South Africa’s continued power supply issues plaguing its productivity.
“While we eagerly await an effective solution to the Eskom electricity crisis, I have no doubt that, with the determined spirit of South Africans, we can also expect to see some inventive solutions to the challenge.”
Van der Walt says prime offices are in top position in the two-tiered office market. There is a demand for A-grade space in certain nodes. Areas such as Rosebank, Sandton, Umhlanga andCentury City are still attracting new international clientele.
The market for B- and C-grade office property remains stagnant. In this sector, new developments will be mostly tenant-driven, with few speculative projects.
Excellerate is also seeing its listed property clients diversifying into new subsectors, with residential housing foremost among these, including student accommodation.
However, the sector’s search for advantageous opportunities goes even further, such as medical and storage facilities, she says.
The sector isn’t only looking for new investment opportunities, but considering all areas that can add value to their businesses. She says property owners are seeking new avenues for income from their assets, such as building sources of non-GLA income streams.
She says they’re looking to offset pressure on rentals by focusing on new ways to optimise cost-efficiencies. For cost reductions, bundled services are increasingly being recognised as an effective way of achieving cost savings.
Van der Walt says the property sector will have two areas of focus in the coming months: keeping the basics in excellent order, and finding the next big thing, or big things, to drive property performance.
Author: Marna van der Walt, CEO Property Services