Durban – Despite challenging economic conditions, currency volatility and political uncertainty, the South African commercial property market saw a 55.2% increase in investments in the 2016 period.
This is according to released real estate consulting firm JLL SSA’s 2016 Investment Review of the South African property market.
It showed a R28.8 billion increase in investment (from R18.5bn in 2015), and a similar 52.8% increase in gross lettable area (2 million m²).
The report reviews investment activity in the South African commercial real estate market and analyses key trends observed from investment sales data.
While portfolio sales contributed notably to this value, (key portfolio deals included purchases by Tradehold, Imbali Properties, Delta and Mendo) investments still grew by an exponential 28.0% if Tradehold is excluded.
From a geographic perspective, Gauteng continues to dominate activity, accounting for 50% of the total investment value in the year.
However, KwaZulu-Natal and the Western Cape showed stronger investment growth, both more than doubling investment levels of 2015.
Industrial activity dominated KZN’s growth.
JLL SSA’s head of research, Zandile Makhoba, reported the investment growth in 2016 was the highest the company had seen in the past five years, which was interesting in the light of perceived over-supply among developers in the market.
“This is a good reflection of investors seeing value in existing fixed assets, as well as long term confidence in the economy.
“It must be noted on closer inspection, we have seen a slowing in greenfield investments over the past few years. For instance, the growth in new commercial building plans has reduced from a peak of 25% in 2012.
“This is considered a mitigation against a potential over-supply which could stifle rental growth as investors look to upgrade existing buildings and improve their value, rather than to break new ground adding new lettable area to existing stock.”
Looking ahead, whether buying or selling, investors remain conscious of an economic climate which could affect their investment returns.
In the commercial office space
KZN recorded the highest growth in the year with sales more than doubling at R781 million. The rise was largely driven by the Tradehold portfolio purchase from Collins Property Projects.
Nationally, investments continued to show healthy growth in 2016. A total of R8.3m was invested in existing office stock, a growth of 8.9% on a year-on-year basis.
On the retail front
In 2016 there was compelling evidence of transactional interest returning to key metros after three years of growth outside the major metropolitan areas.
A total of 83 retail properties – the highest number of recorded deals since 2011 – ranging from community to small regional malls was transacted in 2016.
On the industrial front
JLL’s 2016 Investment Review confirms a notable increase in 2016 industrial investment activity.
The Independent on Saturday