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Industrial property tipped to perform best

With manufacturers experiencing a boom, the industrial property market would probably be the best performer in the commercial property sector next year, property valuers and economists Rode & Associates said last week.

In the latest Rode's Report on SA's property market, Rode & Associates said that all types of property in the country were set to prosper in the coming year.

But Rode's Report editor Garth Johnson said industrial property would probably be the best performer due to the strong performance of SA's manufacturers .

"That fits in with the strong (economic) growth expected in the next few years, coupled with low vacancy rates for industrial property," said Johnson.

Real industrial property rentals have been decreasing for the past 20 years and Johnson said it remained to be seen whether the latest upswing in industrial property was going to be a long-term phenomenon.

Rode & Associates said that, in line with its forecasts, capitalisation rates for all commercial property types continued to fall during the third quarter of this year.

Capitalisation rates the nonlisted property sector's equivalent of the forward earnings yield of shares on the JSE Securities Exchange SA decline when prices rise. Johnson said that the decline in capitalisation rates continued on the back of firmly entrenched lower inflation expectations, and fierce bidding for nonresidential properties by listed property funds and property syndicates .

Although Rode & Associates said the office property market was still struggling due to an oversupply problem, Johnson said the excess supply would be "mopped up" quickly in light of the expected economic growth during the next three to five years.

However, the Rode's Report said that vacancies in many decentralised office nodes were still above normal levels, and that the rentals in the decentralised office market "continued to disappoint" in the third quarter of this year .

The group is expecting the retail property market, which has thrived on the back of a retail boom, to continue to perform well.

Rode & Associates also expected the listed property sector to maintain its strong performance .

However, the group said the next few years would see listed property prices driven by fundamentals such as declining vacancy rates and increasing real rentals.

Article by: Nick Wilson - www.sapoaonline.co.za