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Commercial property trouble spots

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26 Feb 2013

Commercial property this year will see continued pressure on commercial property owners and occupants from administered prices and municipal charges, according to Izak Petersen, chief executive officer of Dipula Income Fund.

Commercial property this year will see continued pressure on commercial property owners and occupants from administered prices and municipal charges, according to Izak Petersen, chief executive officer of Dipula Income Fund.

“Slow economic growth will continue and as a result, rental growth will be modest,” says Petersen.

Petersen points out that companies in the listed property sector will continue to be well capitalised and take advantage of expansion opportunities.

However, he says the sector will keep its cautious stance on property development.

“We are unlikely to see many speculative developments, especially the office and industrial sectors, but there should be revamps in all three commercial sectors and the roll out of retail centres in both rural and urban areas.”

Gary Palmer, chief executive officer of Paragon Lending Solutions notes a surge in investors and buyers looking for funding to finance growth indicative that they are more positive going into 2013, compared with last year.

“Our research has revealed that investors are actively exploring property deals again and are forecasting steady growth in their respective businesses.”

With interest rates remaining unchanged, which is good for raising capital, the current economic climate is providing opportunities for developers and investors, but they need funding to get off the ground, he says.

Palmer explains that there was strong demand in 2012 in the retail sector, which experienced low vacancies and in particular, there was demand in this sector for regional shopping centres, petrol stations and food chains.

Although largely dependent on consumer spending and the local economy, the retail property sector is expected to continue to grow with a number of retailers looking to increase their exposure, he says.

Gary Palmer, chief executive officer of Paragon Lending Solutions notes a surge in investors and buyers looking for funding to finance growth indicative that they are more positive going into 2013, compared with last year.

He says the industrial sector performed well and is likely to remain stable, having enjoyed moderate rental growth in 2012.

“High operating costs and the lack of new major industrial developments are the biggest threats to growth in this sector.”

Palmer says the office sector is expected to remain flat with vacancies and retaining tenants proving to be a hurdle property owners need to overcome in 2013, so new developments in the sector would be a riskier move.

The office sector isn’t expected to recover any time soon, with a high number office vacancy rates that need to be filled.

“All the funds seem to be competing with each other on high value properties with blue chip tenants and long leases.”

“Despite the property market currently looking flat, people are optimistic as the sector remains an attractive alternative investment.”

Investors with access to capital and the ability to move quickly on a transaction will be able to purchase excellent value in 2013, he says.

“Banks will remain cautious with lending due to low interest rates and turnaround times are slower.”

Palmer adds that investors should look for alternatives for quick access to short-term funding from second-tier lenders to secure the deal in anticipation of a bank loan. –Denise Mhlanga

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