Cape Town - Well-positioned commercial property in outlying areas around South Africa is proving increasingly attractive to both local and international buyers who continue to find value in sustainable investments, said Norman Raad, CEO of Broll Auctions and Sales.
Notably, there will always be demand for retail properties where investors – in pursuit of yield and income, perceive opportunities to unlock potential, he pointed out.
Such is the case with Broll's sale of the 7 530 square metres Queenstown Mall in the Eastern Cape, which was listed to go on auction but achieved a market-related price of R62m prior to our multiple auction held in June 2015.
Raad said with a yield of 10%, this is a fair market price from a private investor who has plans for expansion and is bringing new tenants into the centre.
The sale of a further 20 000 square metres of retail, industrial and office space was concluded at the auction.
Some of the other properties sold on the auction included a property consisting of multi-tenanted industrial units in Boksburg – which fetched a selling price of R22.1m, an industrial mini-park in Heriotdale in Johannesburg which sold for R16m, and multi-tenanted units in Wynberg in Johannesburg which fetched a total price of R9.24m.
A block of ground-floor retail and residential apartments above in Norwood in Johannesburg achieved R10.4m. In Lichtenberg in the North West Province an office building was sold on the auction for R7.8m, a 4 610 square metre industrial warehouse in Powerville in Vereeniging was acquired for R6.5m, while a small retail centre with upstairs office component in Bronkhorstspruit just east of Pretoria and en route to Witbank (eMalahleni) was purchased for R6.1m.
“Not surprisingly, particularly in the current economic climate, we have found there is minimal demand for vacant buildings. The focus is on sustainable investments - where tenants can easily be replaced should they default or depart. As a result of lower risk, well-positioned properties will always be in demand," said Raad.
“We have noticed that private investment market yields have moved above 10%. Historically, many properties achieved single digit yields, however, with an increased supply of stock in the market, buyers have an opportunity to be more selective on their investments. Sellers who envisage no upside on their respective properties are helping create movement in the market, thereby affording buyers the opportunity to unlock potential.”
He says other trends are seeing listed property funds divest of non-core stock and stock which has been exhausted to its full potential.
“Whereas they may no longer wish to expend further time nor invest further in these properties, the smaller property investor has the energy and vision to turn a fund’s rough diamond into a gem,” said Raad.
The positive demand for commercial property is borne out by a recent Lightstone report, which reveals that transaction activity in the South African commercial market has increased in recent years. The report also highlights the acquisition of properties in non-CBD areas.
Bradley Stephens, MD of Broll Auctions and Sales, said they have also seen investors divest of their smaller commercial property portfolios and invest in the Reits (real estate investment trusts) as these offer more liquidity and flexibility with their investments.
“Simultaneously this has created new opportunities for new players to enter the market. The time has never been more opportune for investing in the South African property market, as international investors still find huge value in solid bricks and mortar in comparison to other countries. The only barrier to entry in the current market is finance and the loan to value conundrum,” said Stephens