Lots of cash in commercial sector
2009-03-23 · Property Market Reports
With equities remaining under pressure after a year in which investors have had to endure a turbulent marketplace, the commercial property market in general remains buoyant with cash investors aplenty seeking the right yields.
So says Geoff Stroebel, GM of Pam Golding Commercial, who adds that there is still a demand for the purchase of office space, and strong rentals are being achieved with no immediate sign of a downturn.
He says there are many ways of achieving your investment spread – and goals – in the commercial property sector, with examples as follows:
- Purchasing your own premises for your business, ie. becoming an owner-occupier.
- Purchasing some sectional title office space and installing a quality tenant to provide a rental return. Currently, rental escalation averages at around 10%.
- Purchasing an entire office, or retail or industrial property, the size of which is dependent on your capital capacity. Here yields are currently anticipated to be in the region of 10-12%.
- Investing in the listed property sector – which has shown exceptional asset growth.
- Entering into an investment syndicate in order to achieve the above.
"It is however important to note that such investments are not to be considered as short-term performers, and there are naturally also inherent risks that should be considered, such as tenants reneging on their rental commitments, etc. However, the commercial property market has not seen the marked slowdown which affected the residential property market, and has held its own. One only has to look around Sandton and Cape Town to see a construction crane on almost every other street corner, while property refurbishments are plentiful, providing prospective tenants with upgraded specifications in convenient, central locations.
"Most importantly, South Africa's economy in general should start to see an upward trend by mid- to end 2009. Certainly, anticipation of a continuation in interest rate reductions in the immediate future is expected to bolster market sentiment, while infrastructural investment ahead of the forthcoming 2010 Soccer World Cup bodes well for medium to long-term performance of the commercial property market," says Stroebel.
So says Geoff Stroebel, GM of Pam Golding Commercial, who adds that there is still a demand for the purchase of office space, and strong rentals are being achieved with no immediate sign of a downturn.
He says there are many ways of achieving your investment spread – and goals – in the commercial property sector, with examples as follows:
- Purchasing your own premises for your business, ie. becoming an owner-occupier.
- Purchasing some sectional title office space and installing a quality tenant to provide a rental return. Currently, rental escalation averages at around 10%.
- Purchasing an entire office, or retail or industrial property, the size of which is dependent on your capital capacity. Here yields are currently anticipated to be in the region of 10-12%.
- Investing in the listed property sector – which has shown exceptional asset growth.
- Entering into an investment syndicate in order to achieve the above.
"It is however important to note that such investments are not to be considered as short-term performers, and there are naturally also inherent risks that should be considered, such as tenants reneging on their rental commitments, etc. However, the commercial property market has not seen the marked slowdown which affected the residential property market, and has held its own. One only has to look around Sandton and Cape Town to see a construction crane on almost every other street corner, while property refurbishments are plentiful, providing prospective tenants with upgraded specifications in convenient, central locations.
"Most importantly, South Africa's economy in general should start to see an upward trend by mid- to end 2009. Certainly, anticipation of a continuation in interest rate reductions in the immediate future is expected to bolster market sentiment, while infrastructural investment ahead of the forthcoming 2010 Soccer World Cup bodes well for medium to long-term performance of the commercial property market," says Stroebel.
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