Confidence in the commercial property sector remains sound and investors are ready to commit, but some sellers appear to remain fixed on achieving returns which were feasible 8 to 12 months ago.

"Unfortunately, sellers' expectations regarding achievable prices are not taking into account what the current market is prepared to pay. The fact is that while the market for good income-producing investment properties remains strong, purchasers reflect the reality of what is taking place in the market place right now," says Pam Golding Commercial general manager, Geoff Stroebel.

"And at present, shrewd investors - as well as owner occupiers and corporate buyers - are prepared to wait until the deal is right and put in offers at yields they believe are correct given the current market conditions. Investors, who by their very nature tend to seek income producing properties, are currently looking to achieve returns of 11% or 12%, given the present higher interest rates," says Stroebel.

He says investors are not locked in to seeking good properties in any particular locale, as long as they offer sound returns. In addition to the traditionally more popular locations of Cape Town and Johannesburg they will consider properties in other areas such as Pretoria - and elsewhere in Gauteng, Durban, Bloemfontein, and the Eastern and Southern Cape.

Stroebel says in the Cape Town city centre the commercial property market remains buoyant with a strong demand for A grade accommodation.

"There's very little A grade rental space available in the central city, and a shortage at the nearby V&A Waterfront. If you can find it, such quality office space in the central city achieves rentals of R100 to R130 per square metre per month plus parking, while B grade space, which just two years ago ranged from R55 to R70 per square metre, is now in the region of R90 per square metre. We believe in two years' time we should be seeing rentals of R150 to R200 per square metre being achieved for good quality office space in the city centre - with parking additional. Interestingly, a parking bay in the city currently sells for approximately R100k a bay.

"The demand for office space, which still exceeds the supply, continues to push up prices. We're receiving enquiries from corporates wanting to upgrade to better quality or larger offices and are currently assisting an international company which is seeking 12,000 to 15,000sq m of office space to let in the central city area. While some older buildings are being revamped, many potential tenants prefer a brand new building," says Stroebel.

PGC also reports a strong move towards the take-up of commercial space in the vibrant De Waterkant area of Cape Town's CBD, where there is an anticipated demand for approximately 150,000sqm over the next five years. "Over the next two to three years various new developments will be coming on stream to cater for the growing demand, and these will be mixed use comprising retail and office accommodation," adds Stroebel.

Currently available for purchase is 11,650sq m of penthouse style space zoned for mixed-use development on the top two floors in an exclusive De Waterkant location in Greenpoint, with terraces of 509sq m, a plunge pool and 25 secure parking bays available.

It includes facilities to host functions for 200 to 300 people. One or both floors can be sold and the property could also be used for luxury apartments.

"The shortage of properties for sale during 2007 translates into an ongoing demand for investment properties as well as owner occupier space. In addition to the city centre, office parks and multi-use office development on the CBD peripheries are in demand," says Stroebel.

For more information contact Geoff Stroebel on 021 417 7878 or send an email.

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