Building boom is gearing for next upswing

Pretoria - A multibillion-rand building boom is taking place in South Africa's major cities, a sizeable portion of which is unrelated to the 2010 soccer World Cup or the Gautrain rapid rail project.

Jacques du Toit, a senior property analyst at Absa, said the planning of big commercial projects had started two or three years ago and to stop these developments now would have huge cost implications.

What was also important, Du Toit said, was that property investors and owners were planning and gearing themselves for the next upswing.

"It might seem quite strange that they are starting on these projects in the current economic cycle, but they take time to be completed.

By that time, the market will have started to turn, especially the retail, with interest rates coming down."

Du Toit added that after this week's decision by the Reserve Bank's monetary policy committee to leave the repo rate unchanged, Absa's forecast was for interest rates to remain stable.

This was not such a positive development, he said, but it was "the first step towards lower interest rates down the line and the next movement will be down".

He expected the first cut in interest rates in the current cycle to be next April or June.

Du Toit said it was possibly not a bad time to start projects because when the economy turned, these new developments and expansions would be on line and geared to take advantage of the upswing.

Major projects include:

  • The expansion and refurbishment of the landmark Sandton City at a cost of R1.77 billion, with construction expected to commence towards the end of this year and be completed in early 2012.
  • The R6 billion Menlyn Maine property development in Pretoria, which is to be developed by African Spirit and will include a shopping complex, hotels, parks, restaurants, residential units and offices. Construction is set to start in October.
  • A R550 million project to build a five-star Taj Hotel by the diversified India-based Tata Group, in the Melrose Arch mixed-use precinct. It will be completed in 2011 and is part of the next three phases of development in the precinct, which will cost R1.72 billion and provide a total bulk of 87 000m2 of office, hotel and retail space.
  • Expenditure of R1 billion by Triangle Core Real Estate Fund, part of Old Mutual Investment Group's Property Investment arm, on the expansion and refurbishment of its regional shopping centres, including Gateway in Umhlanga and Menlyn Park in Pretoria.
  • The R600 million 18-storey Alice Lane Office Tower development in Sandton, a joint development between Zenprop and Tiber, which is scheduled for completion in 2010.
  • The R500 million redevelopment, linked to a planned Gautrain station in Rosebank, of The Firs shopping centre and offices and the Hyatt Hotel by Investec Property.

A number of other major projects that have not yet been announced or launched are expected to take place in the vicinity of the new on-ramps and off-ramps that form part of a major highway improvement project launched by the SA National Roads Agency.

The building boom is not entirely restricted to the country's major cities.

Amdec Property Development, one of the leading local property development, investment and project management firms, this week announced a new R2.5 billion project at Parsonsvlei, about 12km west of the Port Elizabeth city centre.

Plans for the 128ha mixed-use site include about 2 200 homes in addition to businesses, shops, light industry and community facilities, including parks and a school site.

The development will be home to about 10 000 people and will be built in phases over the next five years, with construction of the first phase commencing in January.

Magnus McDowall, Amdec's Cape and coastal regional director, said the firm had great confidence in Port Elizabeth.

"As a result of various macroeconomic factors, the commercial capital of the Eastern Cape is experiencing steady growth, which has led to increased pressure on the availability of housing, especially for the middle income bracket," McDowall said.

Amdec has a current development portfolio valued at more than R4.5 billion.

In nearby Jeffreys Bay, a R3.5 billion commercial and residential development is set to radically transform the Eastern Cape holiday town.

Fountains Estate, a 600ha mixed-use development, will be one of the largest of its kind in the country. It is being developed by Buchner Propvest.

The firm previously developed Lonehill in Sandton and Aston Manor and Blue Saddle Ranches in Johannesburg, as well as Marina Martinique in Jeffreys Bay.

The development will include a 40 000m2 regional shopping mall with 80 percent national tenants, including Pick 'n Pay, Woolworths, Edgars, Game, a motor city, the town's first hospital, a Lifestyle Nursery World, 30ha of commercial offices, residential and retirement villages and a lifestyle and equestrian estate.

Construction on the mall was started last year. It is scheduled to open in October.

Oswald Buchner, the chief executive of Buchner Propvest, said the Fountains Estate would do for the Garden Route what the Victoria & Alfred Waterfront had done for Cape Town and what Sandton had done for Johannesburg.

Aticle by: Roy Cokayne - www.busrep.co.za