Commercial property owners and tenants will be significantly affected by Eskom’s electricity tariff hikes.

The news that Nersa granted tariff increases of 24,8% for 2010, 25,8% for 2011 and 25,9% for 2012, comes at a time when market conditions in the commercial property market are already under pressure.

Norbert Sasse, CE of Growthpoint, says these increases will push up the costs of occupation considerably. He says although building owners can technically pass these costs on to the tenants, nett rental income will fall over the long term.

A decrease in nett rental income will have an impact on the income disbursement of unit holders. He says it is difficult to determine how big this impact will be.

Disbursements appearing in the current results already reflect the difficult market conditions in the commercial property sector during 2009.

Growthpoint recently declared an interim disbursement of 59,1% per linked unit for the six months until end-December – growth of 5%.

Sasse says this figure may not look very rosy, but it is quite an achievement for a company to show any growth in light of one of the worst recessions ever. This disbursement exceeded analysts’ expectations.

Anton de Goede, property portfolio manager at Coronation, ascribes Growthpoint’s performance to the firm maintaining its vacancy levels. Growthpoint’s total vacancy figure has climbed to 6% from 5,4% at the end of June last year. De Goede says this is in tune with the market norm of between 4% and 7%.

Sasse says Growthpoint’s office component is currently most under pressure, largely due to aggressive development in the boom period. The office vacancy figure currently stands at 9,2%, of which 3,1% represents development space.

One of the highlights for Growthpoint was the acquisition of a controlling stake of 76,2% in an Australian property trust company. The firm, which is now known as Growthpoint Properties Australia, was included in the company’s results for the first time.

Sasse says the investment in Australia was done when the market was at its lowest, and presented an extraordinary buying opportunity. “Growthpoint Australia gives us a new foreign opportunity and the challenge is to expand the fund in a market that is recovering quickly and which offers fewer growth opportunities.” – Elma Kloppers, Sake24

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