Business property investors ‘on a high’

THE prospects for South African commercial property investors over the next two years seem positive, with steady confidence levels from major players in this asset class.

According to the latest commercial property confidence index released by online business property portal eProp, market confidence in “business property” is stronger than ever, suggesting that the property cycle is in an upward phase.

Marc Schneider, research director at eProp, says in a survey where more than 40 property players with assets in the region of R50bn were questioned, the index was at an “extremely positive” level 75, with 50 being neutral. The index is out of 100.

“The index is strongly positive and it has been positive since the beginning of last year.” The index, which was started in February last year, is also at the same level as the prior six months.

Confidence in industrial property was the highest, with a net balance of 53% of respondents positive about the sector, based on the assessment of 10 criteria. Among the criteria were the number of leases the property players expected to sign, the expected net operating income from properties and expected vacancy levels.

“Retail (property) has picked up since August last year. It’s standing at a level of 46% of respondents (being positive about retail property) as opposed to 39% six months ago. It’s possibly a reassessment of retail and there has been a slightly more positive outlook for retail whereas previously there may have been an expectation of a downward trend.”

Schneider says that by the same token confidence in offices is also quite high at 49%, but this is down from the 58% of six months ago.

Catalyst Fund Managers says the expectation of distribution growth is still driving performance in the listed commercial property sector.

“In February about 50% of the sector declared results and the weighted average distribution growth was 8,9%.

“Based on the strong and improving property fundamentals, the listed property sector should deliver a 9% distribution growth over next two years,” says Catalyst.

The group says that, provided there are no external shocks which could cause an interest rate hike, the outlook for commercial property in general is still favourable over the next two years.

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