select
|

No improvement in demand for office space

No sudden improvement in the demand for office space could be expected in the near future‚ as key demand drivers were “losing their vigour”‚ according to property economist Erwin Rode.

In the latest issue of Rode’s Report on the South African Property Market‚ Rode said that what was discouraging for the outlooks for office demand and vacancy rates was the deceleration in output in the services sector in the first quarter of the year.

Rode‚ of Rode & Associates‚ publisher of the report‚ said: ”Waning growth of output in the services sector does not bode well for its employment prospects‚ which in turn implies continued weak demand for office space.

“Slumping business confidence is another bad omen for office demand - this as businesses are unlikely to expand premises or hire new employees while confidence levels are low.”

The result‚ “unsurprisingly”‚ was that in the first quarter of 2012‚ office vacancy rates remained stagnant‚ leading to unimpressive rental performances.

In the reporting quarter‚ the only rentals that could muster any growth at all were those in Pretoria decentralised (0.5%)‚ according to the report.

Market rentals in Johannesburg decentralised remained at the same level they were at a year ago‚ while those in Cape Town (down 1%) and Durban decentralised (down 2%) contracted slightly.

Weaknesses in the manufacturing and retail sectors‚ “the two support pillars of the industrial property market”‚ were likely to continue to place a lid on demand and‚ consequently‚ on rental growth.

In the first quarter of 2012‚ only the Central Witwatersrand (at a growth of +10%) was able to buck the trend of poor yearly growth in rentals. In other major industrial conurbations‚ such as the East Rand (+3%)‚ Durban (+0.5%)‚ the Cape Peninsula (-1%) and Port Elizabeth (-2%)‚ rentals either showed poor growth or contracted compared with a year ago.

On the residential front‚ the report revealed that nationally‚ rentals on flats and houses grew by 5% and 4% respectively‚ while those on townhouses lagged behind‚ at only 1% growth.

Meanwhile‚ house prices showed mild yearly contractions for the first six months of the year - the largest contraction recorded since the 1980s‚ according to Rode.

“House prices last significantly deflated during the first half of 2009‚ after which they rebounded‚” he said.

But while it had been a “bumpy ride” for capitalisation rates over the past three years‚ the investment mood among direct unlisted investors “remained fairly buoyant”.

Rode said that even amid the uncertain economic times‚ “property investors refused to panic and this was in part due to the fact that‚ despite an upward trend since 2008‚ nonresidential vacancy rates are still below their early 21st-century highs”.

A property’s vacancy rate has a direct impact on the perceived risk to its potential income. This will in turn affect the required income return‚ or capitalisation rate‚ at which investors will be willing to trade property.

(I-Net Bridge)



  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 19 Jun 2018
      In the current market, letting out a property can be a good option as rental demand remains strong, especially in the northern suburbs of Johannesburg. This is according to Chris Renecle, MD of Renprop. However he says that before homeowners let their property out, there are five key points they should make sure are covered before they market the property for rent and sign any lease agreements.
    • 19 Jun 2018
      The Capetonian dream is to live by the ocean with the iconic mountain making an appearance somewhere in the horizon. But, that dream comes with a hefty price tag that many simply cannot afford. But, should you venture some kilometres out of the city centre, entirely new realms of beachside bliss await you …
    • 19 Jun 2018
      Douw Steyn, one of the richest men in the country, recently allowed a rare glimpse into his Fourways Palazzo when it was featured on the SABC lifestyle programme Top Billing - and it is beyond your wildest dreams!
    • 18 Jun 2018
      Many home sellers are motivated to appoint estate agents because they know that the agency will carry the costs of advertising and marketing their property.
    • 18 Jun 2018
      When a property is sold when it has a tenant in occupation, the questions often raised are: “What happens to the tenant if the landlord sells the property?”, and what rights the tenant will have with regards to cancelling the lease or enforcing it, says Sunell Afrika, rentals manager for SAProperty.com.
    • 18 Jun 2018
      Sellers are often caught off-guard by the expenses incurred in the selling of a property. Just like there is no such thing as a free lunch, there is also no such thing as selling your property without incurring at least some costs.
    • 15 Jun 2018
      The second quarter of 2018 has proven to be the turning point for Midrand’s real estate market, especially the upper end which started to waver towards the end of a tumultuous 2017 with a notable drop in both sales and average selling prices.
    • 15 Jun 2018
      According to data recently released by FNB, the average age of a South African home buyer has increased from 38 to 44 this year. In an attempt to help first-time buyers enter the market sooner, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, walks us through the steps of saving for your first home.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK