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South Africa Real Estate Report Q1 2011
Market |
Real Estate |
Report Type |
Market Research |
Country |
South Africa |
Published |
16 December 2010 |
Number of Pages |
67 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
File Format |
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The global financial crisis had less of an impact in South Africa than on many developing countries.
Continuing strong Chinese demand for South African mineral exports has resulted in significant resilience in the South African economy.
Although rental rates fell in each of the three main sub-sectors in 2009, and in each of the three cities (Johannesburg, Cape Town and Durban) for which we gathered data, the slippage was less than in many developing countries whose real estate sectors are surveyed. We 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 Africas 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. Our 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. We 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.
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