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Dec 07, 2007:
The commercial and industrial property market in KwaZulu-Natal is stronger than ever with indications that the boom will continue into 2008 and beyond.
A really positive factor for the sector is that rentals have not yet peaked for industrial property - in fact they are far off where they should be, especially for older properties.
This is the view of the South African real estate company MaxProp whose managing director, Russell Scorer, said there were a large number of industrial properties in the greater Durban area where tenants were sitting on rentals up to 30% lower than what current market trends were determining.
"So when those leases come up for negotiation rentals are likely to jump significantly with investors reaping the financial benefits."
Scorer said there was still a serious shortage of land, especially in KwaZulu-Natal but also country-wide, for development in the commercial and industrial property sectors.
"There are not many sellers of commercial property. Rising interest rates are not causing stress yet."
The lack of suitable land for commercial and industrial property development has pushed commercial land prices through the roof - we are talking about industrial property selling in Durban for R1,500 per square metre and more."
Private investors may find the going a bit tougher next year with rates having moved up significantly but MaxProp believed there would be no significant change in that market in the first half of the new year.
"The interesting thing is that with prime at 14% and expected to go to 14,5%, the ability to borrow money to fund property investment transactions is getting more difficult. The pressure is going to be on developers of property to look at their initial yields or cap rates which have been at historic lows - I believe there is upward pressure there," said Scorer.