Despite the fact that retail sales growth has moderated to some degree, private investors continue to demonstrate a steady appetite for commercial property acquisitions in this sector of the market, says Norman Raad, CEO of Broll Auctions and Sales.
“With 2.4 percent year on year growth in May, retail sales growth has still outperformed for the current year to date when compared to the same trading period in 2014. While retail has begun showing signs of saturation with some shopping centres ‘stealing’ from neighbourhood malls to offer something cheaper and more attractive in this very tight and consumer driven market, astute investors are capitalising on opportunities in decentralised nodes in regions around the country.
“Positively, the industrial sector has shown definite signs of growth with limited availability of good quality logistical warehouses and smaller mini-unit warehouses. In the office market, space is generally over-supplied, although the gap between new office rentals and existing commercial space is ultimately expected to narrow. Generally, there have been noticeable changes in the commercial sector with even greater emphasis on secure tenants and easily let, well-positioned properties.”
Raad says the recent uptake of a diverse range of retail, industrial and office properties at national, multiple auctions held by Broll Auctions and Sales during 2015 to date reflects sustained confidence in commercial property by both the listed property sector and private property investment market. “Buyers are enjoying the current cycle of opportunities, with experienced investors buying high yielding assets as the commercial market and investors reinvent themselves – on a playing field with different rules.
“It is interesting to separate the listed property sector from the private property investment market, as they have different investment limitations in terms of acquisitions and growth. Right now the funds are aggressively looking outside the borders for sound investments, as well as acquiring development companies in the different sectors to secure pipeline properties, as investment stock is as scarce as hen’s teeth.
“We have also seen a number of the funds diversify into the residential market, searching for income and yield enhancing residential units. The demand for student accommodation is also on the radar, but this investment decision depends largely on having management services in place that are experienced in dealing with the residential tenant.”
He says the private commercial property investment market is faced with financing limitations. The banks are asking for 25-50 percent capital on investment properties and with the just-announced interest rate increase, a variety of different factors influencing investors’ decisions. This includes the increase in rates, electricity and municipal accounts, which are not being able to be passed on to tenants across the board. Taking these considerations seriously into account, the private investor is applying a higher vacancy factor or risk factor when valuing properties. Such factors have definitely had an impact on yield the private investor is willing to pay. Yields have moved into double digits and sellers are having to adjust to a different investing climate.
“Of benefit however is that property investors can now enjoy the luxury of investing in the REITs (real estate investment trusts) that come with the security of good dividends, liquidity and the deferred tax benefit. As a result, and amid ongoing economic challenges, we are seeing the more prudent and conservative investor has moved from owning properties to owning shares in the REITs.”
At noon on Tuesday 18 August 2015, 30 commercial properties comprising a selection of well-maintained retail, industrial, office and redevelopment properties go on auction at The Wanderers Club through Broll Auctions and Sales.
In Pretoria in Tshwane Municipality and set on an erf of approximately 8.79 hectares, Wonderboom Retail Centre – with a GLA (gross lettable area) of 6 834sqm – comprises a fully operational Sasol filing station, retail shops and workshops well positioned with exposure to high traffic volumes along the R101 between Pretoria and Hammanskraal. The property is only some 11km north of Pretoria CBD on the western periphery of an established mixed-use suburb, Annlin, with Onderstepoort on the western boundary. Most of the shops and workshops are tenanted, and a large portion of the land is available for further development. With special zoning, the site can be used for the purpose of a hotel, gymnasium, public garage, motor show room and restaurant.
Says Raad: “This prime property is strategically located in a busy arterial route connecting the northern parts of the country, and in extremely close proximity to Wonderboom airport, which is being opened to domestic and international commercial flights. This presents a scarce acquisition redevelopment opportunity – the property is large enough to accommodate a convenience centre, while Sasol has plans to upgrade and redevelop its site.”
Key retail properties which become available at the auction include two shopping centres in busy nodes in KwaZulu-Natal. Anchored by Edgars and with a GLA of 3 189sqm, Stanger Shopping Centre is strategically located near uMhlanga. Other national tenants include Jet, Markhams and American Swiss. Situated in northern KZN and with a GLA of 10 021sqm, Nongoma Shopping Centre is anchored by Shoprite Checkers with other tenants including Jet Mart, OK Furniture, Pep, Capitec and Nedbank.
Prime industrial properties on the auction include a double volume industrial warehouse comprising four buildings of 18 900sqm in total, situated in central Meadowdale in Germiston, Johannesburg, less than 10km from OR Tambo International Airport. With good exposure and access to main and secondary road links, the property is surrounded by similar light industrial and commercial businesses. One of the buildings comprises double-storey office space, two comprise double-volume warehousing with offices, while the fourth is a single-storey conference building.
In Brits in North West province, 28 722sqm of industrial warehousing and offices offers easy and convenient access to the surrounding area, being close to the N4 leading to Pretoria. With an international tenant in place, the property incorporates a large yard with superlink access.
Other properties include a prime corner building of 1 357sqm of office space in Bellville, Cape Town, A-grade warehouses and yard with a GLA of 3 885sqm in River Horse Valley in KwaZulu-Natal, and a variety of further properties – including development land, in Gauteng, Limpopo, Mpumalanga, Free State, KwaZulu-Natal and the Eastern Cape.