Market outlook still bullish for commercial property

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Property investors and developers are upbeat about the prospects for the South African commercial property sector this year despite expectations by analysts and property professionals that the market will remain sluggish.

Gary Palmer, the chief executive of Paragon Lending Solutions, said the retail property sector was expected to grow, with a number of retailers wanting to increase exposure.

The industrial sector was likely to remain stable but the office sector was not expected to recover soon, he said.

Paragon had witnessed a surge in clients looking for funding for growth, indicating clients were more positive going into this year than last year.

Norbert Sasse, the chairman of the Property Loan Stock Association and chief executive of Growthpoint Properties, said listed property outperformed cash, bonds and equities last year with a total return of 36 percent.

It was South Africa’s best-performing asset class for the fourth consecutive year.

Sasse said this year should to be another good one for the sector, although total returns were expected to be well below those of last year at between 10 percent and 16 percent.

“With tougher market conditions overall, companies that can manage vacancies and costs are better positioned to deliver performance for investors,” he said.

“Sectoral portfolio composition will also influence performance. Weak demand will continue in the office sector. However, retail and industrial property will perform well off a base of low vacancies that should remain stable.”

Izak Petersen, the chief executive of listed Dipula Income Fund, said there would be continued pressure on commercial property owners and occupants from administered prices and municipal charges in the year ahead. Rental growth would remain modest.

He said the sector would maintain its cautious stance on property development. Speculative developments were unlikely, particularly in the office and industrial sectors.

But he expected there would be revamps in all three commercial sectors and the roll-out of retail centres in rural and urban areas.


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