Focus Shifts To Commercial Property

The South African property bull is raging forth, but according to economists, the focus has shifted away from residential property to commercial property.

Mr Mike Schüssler, chief economist of T-Sec, was one of the speakers at the annual conference of the South African Association of Property Owners (Veesa) at Sun City recently. He is less than positive about the residential market. According to him, a slowdown in some areas is evident already, and nominal price growth year on year of all properties under R20 million is 3,4%. In his calculations, he had used a three month average, during which time 34 000 properties were sold each month.

Since 2001, 2,59 million properties of up to R20 million were sold in South Africa, at an average price of R433 00 with an average bond of R468 000. Sectors faring best in his opinion are small offices and industrial properties.

Mike speaks from personal experience as far as small offices are concerned, following a long search for a suitable office of his own. "Since the end of 1999 until March this year, 1,9 million new developments were registered. These companies have between four and 12 employees each, and they require the smallest offices."

He is very optimistic about industrial properties. According to him, the country-wide shortage will continue, because city planning schedules are far behind, and it takes longer for land to be zoned and serviced. For this reason, these properties are in demand.

He is less optimistic about retail space, and believes that there may be an over-supply in some areas.

According to Prof Francois Viruly of the University of the Witwatersrand, who is also a property economist, some 12 million people in South Africa receive social grants. In his view the demand for retail space in previously disadvantaged areas is the result of sudden buying power in these areas. Another factor to take account of, Schüssler says, is that Gautengers' income per capita has increase dramatically over the past few years, now standing at R56 000.

He is concerned that all the new retail spaces in townships will have a negative effect on the informal economy, such as spaza shops. "We underestimate the informal economy, and there is room for the development of the informal sector in townships, as well as new office developments in these regions." - Elma Kloppers

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