Somerset West a commercial hotspot

The Western Cape's Somerset West area has been drawing a steady number of commercial property investors in recent years. So says Geoff Stroebel, GM of Pam Golding Commercial (PGC), who adds that "for the average investor wishing to acquire a good commercial property, sound opportunities exist in Somerset West in the price range from around R500k to R2m for offices, industrial and retail space".

"Right now there's a symbiotic relationship whereby small to medium business owners wishing to reinvest capital in their operations are able to help cater for the demand from such investors."

"Many of these are in the light industrial sector or office and typically occupying space of approximately 200-500sqm in size," he says.

"Over the past five years the light industrial property sector has enjoyed a return on investment of approximately 25%, so it made a great deal of sense for the business owner to have purchased his or her own business property and achieved sound returns. Now that times have changed and the economy is placing pressure on many businesses, it becomes more attractive for the business owner to rent rather than own a property – particularly if expansion is anticipated, thereby requiring larger premises, or if cash flow needs to be boosted."

Stroebel says that such businesses are increasingly looking at a sale and lease-back of their properties.

"For the investor this translates into 10% plus returns on investment and a good tenant – which is key. Over the next five years such properties can provide for a solid acquisition, after which time there is the possibility that the tenant may wish to buy the property back or extend the lease for a further five years. Ultimately the investor has the benefit of acquiring a good investment that will generate sound returns in the future."

Recent such transactions concluded by PGC in the area include a small pre-primary school with a tenant in place on a 10-year lease, sold for R1,8m, and 90sqm of office space in central Somerset West sold for R640k.

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