Despite the fact that the South African economy is still experiencing sluggish growth, with the economy slowing to 2.6 percent in the third quarter of 2010, and against the backdrop of historically low interest rates, the commercial property market is performing well, says Marna van der Walt, CEO of JHI property services group.

“However, from an investor perspective, the reality is that investor confidence is beginning to be somewhat eroded by continued strikes and negative perceptions such as those created around Wallmart’s rethinking of the Massmart deal.”

Van der Walt says current key drivers of the commercial market are infrastructural development - including the Gautrain stations and their positive effect on surrounding areas, and government initiatives such as the new multi-billion rand tax incentive programme launched by the Department of Trade and Industry. This incentive is aimed at boosting investment and job creation in the manufacturing sector - which remains under pressure, with the export market impacted by the strong rand.

“Having said that the historically low interest rates – including the most recent interest rate reduction this month (November 2010) - are likely to foster increased positive sentiment in the marketplace and help stimulate increased consumer spending in the retail sector, which in turn has spin-offs for the manufacturing sector through growing demand. Generally the forecast for South Africa’s retail sector is upbeat, albeit highly competitive as successful, new shopping centres will lead to the demise of underperforming centres.

“The trend towards ‘green’ buildings is gathering pace and we are seeing major national tenants such as Nestle relocating to new ‘green’ buildings. Mainly attributable to rising energy costs, the demand for green space is definitely on the increase,” says van der Walt. JHI is currently involved in a pilot project, incorporating 50 existing buildings, to implement cost effective greening projects in order to significantly enhance the appeal of established buildings to tenants. With tenants – particularly small businesses - hard hit by electricity tariff hikes, the emphasis on the ‘greening’ of buildings is expected to rise.

“In regard to the year which lies ahead (2011) we believe we will see the effects of the recession decrease, although high unemployment will still affect the retail market. In the office sector, rentals should begin stabilising, with vacancy levels easing downwards by the end of next year (2011). Also on a positive note we anticipate seeing the continued upliftment of various CBDs around the country. Looking further north into Africa, JHI is currently exploring launching a dedicated JHI office in Zimbabwe, in conjunction with local partners,” says van der Walt.

She adds that the implementation of the Consumer Protection Act in April next year will impact on commercial property landlords, who will need to ensure that the wording of lease agreements is in plain and understandable language. “The Act also introduces constraints on direct marketing which will prohibit brokers from canvassing for tenants, which has implications for landlords regarding the rental of vacant space.

“From a JHI perspective we are relooking at our lease documentation as well as our marketing of vacant space practice to ensure we will be ready for the new Act,” concludes van der Walt.

Issued by Gaye de Villiers
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