Research and Markets: South Africa Real Estate Report Q4 2010

Key Insights on the Real Estate Sector In South Africa

The global financial crisis had less of an impact in South Africa than on many developing countries. Growth had already been slowing in 2008, and the economy contracted 1.8% in 2009. The authors think it is reasonable to suggest GDP will expand 4-5% annually from 2011 to 2014. However, this depends on continuing Chinese demand for South African mineral exports.

Although rental rates fell in each of the three main sub-sectors last year, and in each of the three cities (Johannesburg, Cape Town and Durban) for which the authors gathered data, the slippage was less than in many developing countries whose real estate sectors are surveyed. They therefore conclude that, with the possible exceptions of the office and retail sub-sectors in Durban where vacancy rates have been 20- 25% the demand and supply of real estate to rent is broadly balanced. Market protagonists have taken a realistic view of the long-term challenges in South Africa's business environment.

At the margin, new projects in Johannesburg may lift rental rates. However, there is no evidence the entire dynamics of commercial real estate in the city will be changed by the availability of prestigious new retail/office complexes. The authors' sources in Cape Town and Durban gave little indication that new developments will have an impact in those cities.

It does not seem the World Cup has had a substantial medium- to long-term impact on the commercial real estate sector. It has undoubtedly provided the impetus for substantial investment in new sporting and transportation infrastructure which, in turn, will contribute positively to the overall business environment in South Africa. There has been a rise in top-end retail rents in Johannesburg (and in the more expensive segment of the industrial sub-sector in that city). Overall, though, the World Cup has not had little impact on the supply/demand balance.

After an adjustment through 2009, it appears yields have settled at levels that provide investors with a suitable risk-adjusted return. The authors therefore expect yields to broadly track sideways over the next four years. There may be movement in rental rates, but these will generally be matched by moves in capital values.

South Africa Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Africa's Real Estate industry.

Key Topics Covered:

  • Executive Summary
  • SWOT Analysis
  • South Africa Real Estate SWOT
  • South Africa Economic SWOT
  • South Africa Business Environment SWOT
  • Regional Real Estate Overview
  • Tables

Companies Mentioned:

  • Aveng
  • ERA Real Estate South Africa
  • Group Five
  • Murray & Roberts Group
  • Orion Real Estate
  • Pam Golding Properties Group
  • SA Corporate Real Estate Fund
  • Seeff Properties
  • Wilson Bayly Holmes-Ovcon

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