Commercial developments 'will soar'

Growth in commercial property developments is expected to overtake residential property developments this year, responding to a long-term decline in vacant warehouse and industrial space, says FNB property strategist John Loos...

This follows the release of Stats SA's building statistics that showed a 15% increase last year in total square metre area of residential building plans passed.

The same measure for building plans passed for commercial developments rose 43,8%, compared with a 19% rise in 2004.

"I believe that growth in residential building completions will lose some momentum through 2006. It would appear that the number of plans passed, while still growing solidly, is peaking.

"Commercial property, on the other hand, has the more positive outlook," Loos said.

He expected commercial property to outperform residential property growth this year in terms of building activity and that developers would respond strongly to a long term decline in the vacancy rate of industrial and warehouse space.

In the Eastern Cape, the number of residential buildings completed last year - including new houses, flats and townhouses - fell 19,9% on 2004. Countrywide, completed residential buildings rose by an average of 5,5%.

But taken on their own, new flats and townhouses completed in the Eastern Cape last year rose almost 500% on 2004, well above the national average of 64,3%. Absa senior economist Jacques du Toit said the national residential market was driven by demand for new flats and townhouses and that demand for new houses were consolidating.

"This is probably an indication of the changing trend over the past couple of years towards higher density living in more secure areas, while building cost increases, adding to higher property prices, could also have contributed to people opting for smaller, but more affordable housing," Du Toit said.

Although new offices completed in the Eastern Cape last year dropped 75,6%, shopping space and industrial and warehousing space rose 197% and 162,4% respectively.

This is the highest provincial rise, as the national average of completed shopping space dropped 17,2% and warehouse and industrial space grew at only 1,8% compared with 2004.

"Commercial, and especially retail, property developments normally follow major residential developments after some time," Du Toit said.

It has been reported previously that a shortage of commercial properties existed in Port Elizabeth, with most available warehousing and retail space taken up and high building costs scaring off potential developers.

Marios van Dongen, chairman of the Eastern Cape chapter of the SA Council of Shopping Centres, said some small warehouses were built last year in Port Elizabeth, but that a shortage of retail space still existed.

"We are hoping that the big developments will come soon," he said.

Article by: By Roux van Zyl - www.eprop.co.za