A LEADING economist has encouraged property companies and funds to “think out of the box” and pursue assets not ordinarily considered in commercial property investments.
T-sec economist Mike Schussler expects industrial property to be a top performer over the next five years. However, he says property companies and funds could also look at pursuing “infrastructure” assets such as toll roads, power stations and airports.
Schussler, who delivered a presentation at the annual convention of commercial property association Sapoa in Sun City last week, says he believes industrial property is the one sector that could outperform offices and retail property over the next five years because of manufacturing constraints that indicate a lot more manufacturers are going to have to rent or build new premises.
He says SA’s trade has been growing “all the time”.
“We still expect retail sales to grow. This would positively affect industrial space in terms of the need for distribution space for retail goods exports and imports.”
With other capacity constraints in the economy, private-public partnerships in road construction, hospitals and transport infrastructure such as bridges offer opportunities for companies to make good yields over 30 or 40 years.
“We have toll roads now. We could get to a situation where we have partnerships for the development of hospitals and bridges, electrical stations. There is an opportunity for property and other private companies to think out of the box.”
Thinking out of the box would require defining property in a different way. Until now the commercial property sector has included offices, retail and industrial property as its property types.
Schussler says that Macquarie Bank in Australia buys power stations and made an unsuccessful bid for Heathrow Airport in London.
These new property transactions in SA could work in a number of ways. For instance, the government may want a retail extension to an airport. A developer could undertake this on condition it gets rights to the area for 50 years, after which it would revert to the government.
Schussler says airports are in effect “giant shopping centres with expensive parking”.
A property developer could approach the government and offer to build a toll road to alleviate traffic congestion. It could ask for a lease to operate the road, after which it would revert to the government.
Marc Schneider, a director at eProp, an online commercial property portal, says the sentiment that “industrial is the next big thing” has been around for at least the past year-and-a-half.
Schneider says domestic consumption demand, which has spilt over into the industrial sector, has been one factor behind the industrial property boom. But he says he expects offices to “be running very close with industrial” over the next two or three years.
