Abacus DIVISIONS August 2011 News !
Property market on a slow ride back to recovery – Abacus DIVISIONS
The commercial property sector, which has also been hit by the recession, is continuing to show signs of improvement as an increasing number of companies are starting to look for good commercial space. But the ever-present debt problems facing Europe and the USA could put a damper on any sustained recovery. So said Org Geldenhuys, managing director of property development company, Abacus DIVISIONS .
“While the commercial property market has certainly performed better than the residential market, the last 18 months have seen its challenges. Although some commercial landlords have been seeing good rental returns, real buoyancy has not been there – although it appears that there is now an increased vigor for good commercial space.
“Vacancy levels appeared to have troughed but, in all likelihood, the rental market will only improve once they start to drop. We are going to see improvements in the next 12 months, with the main growth in this sector coming from the longer term leases, where the contractual annual increases in rent will drive things.”
What we are also witnessing, said Geldenhuys, is a continued commitment to inner city renewal projects, particularly in Cape Town and Johannesburg – which is going a long way towards revitalizing these areas. “As inner city renewal continues we are hopefully going to see some of these areas start to lure tenants, something that was not possible a few years ago.”
Combined with these property renewal initiatives – which can only be viewed as extremely positive for the overall property market – have been associated transport projects, such as the Rea Vaya Bus Rapid Transit System in Johannesburg, together with the ambitious Gautrain and the MyCiti bus service in Cape Town.
“Put these projects together and you have an overall revitalisation because inner cities are now becoming more attractive – especially as they are more accessible for suburban travelers.
“While many of the developments surrounding the World Soccer Cup have been viewed as white elephants, these developments have gone a long way to improve a number of districts, especially those surrounding some of the stadiums in Cape Town and Durban. The new stadium areas have become frequently visited by both locals and tourists and are serving to provide as good locations for nearby retail and residential properties – which will provide an indirect fillip for the property market as a whole, including the commercial property market,” said Geldenhuys.
He said that while South Africa’s property market is set for a slow recovery, signs of improving manufacturing output and improved retail sales over the past 18 months are indications that the property conditions could be improving.
“What is of concern, however, is the black clouds being created by the debt crises in the European zone – which has recently being complicated by the USA’s credit rating downgrade from a triple A to a double A. Many economists are holding their breaths and, if we do move closer to a double dip recession, this will not auger well for the property market’s putative recovery.”