Brent Townes, commercial property chief operating officer for Lew Geffen Sotheby\u2019s International Realty in Cape Town, says that the current period of high inflation and low growth in South Africa is exacerbated by high unemployment which means consumer demand led growth out of this cycle is going to be problematic.<\/p>\n
Economic forecasters agree that the world is currently in a stagflation cycle with the possibility of a recession on the cards, he said. \u201cAnd considering that we are only just now emerging from the disruption of the pandemic which significantly impacted the commercial sector, what landlords do \u2013 or don\u2019t do – during the next year will have a considerable impact on their investments.\u201d<\/p>\n
Townes said that with real estate still being considered the surest long-term investment by most people, those considering adding property to their investment portfolios shouldn\u2019t be discouraged – but they should more carefully consider the type of property they buy and also where they invest.<\/p>\n
\u201cIn Cape Town, the picture is a little rosier than in many other parts of the country because semigration is driving the relocation of not only families but also businesses to the region – and this has resulted in a spike in demand for business premises, not only to rent but also to buy.<\/p>\n
\u201cIn fact, we are starting to see a very high buying demand, with the total value of our current enquiries now standing at R1.04 billion and, bucking the recent trend for industrial properties demand to significantly outweigh other sectors, the majority of our recent queries have been for office space (R380 million) and retail (R394 million) premises.<\/p>\n
\u201cWhat\u2019s also interesting is that only 20% of our enquiries are from large investment purchasers whilst 80% are from small and medium-sized business owners who are looking for new homes for their companies,” said Townes.<\/p>\n
Townes advises potential landlords to do their homework and find out exactly what types of properties are in demand and which are the most sought-after commercial hubs before making an investment.<\/p>\n
\u201cThe industrial sector, which was dominant before the pandemic, has remained robust, although a notable shift has been the growing demand for \u2018big box\u2019 industrial spaces rather than the small-to-medium sized properties which were more popular prior to lockdown.<\/p>\n
\u201cBefore the pandemic, we were already experiencing a shortage of very large warehousing space and this has continued with an acute shortage of specific to purpose industrial properties for sale and, in some cases, to let as well.\u201d<\/p>\n
Townes added that the malls in the retail sector have largely become a landlord\u2019s market, with owners being able to select the tenants they desire.<\/p>\n
He lists the high-value hubs in Cape Town as being: Airport Industria, Bellville, Boquinar, the CBD (including the Foreshore and the Waterfront, which is mainly a leasehold environment), Century City, Epping 1 & 2, Goodwood, Milnerton, Ndabeni, Parow, Westlake, Woodstock and Wynberg.<\/p>\n
\u201cSo far, in the Mother City, it appears that the trend for most commercial property owners is to hold in this cycle or extend their exit timing, where their balance sheets can absorb the threat of rising interest rates (if geared) and low growth.\u201d<\/p>\n
\u201cPrivately owned commercial real estate has historically offered a strong hedge against inflation and can show more resilience than other investments during a recession, but not all asset classes of real estate investments will be able to weather the storm.<\/p>\n
\u201cSavvy investors who will continue to achieve returns are those who have done their homework and manage their investments well during this period,\u201d said Townes.<\/p>\n