“Notably, there will always be demand for retail properties where investors – in pursuit of yield and income, perceive opportunities to unlock potential. “Such is the case with our successful sale of the 7530sqm Queenstown Mall in the Eastern Cape, which was listed to go on auction but achieved a market-related price of R62 million prior to our multiple auction held in June (2015).”
Raad says with a yield of 10 percent, this is a fair market price from a private investor who has plans for expansion and is bringing new tenants into the centre. Anchored by Pick n Pay and with other tenants including large, multi-national groups such as Pep and Standard Bank, the local retail centre is very well-positioned in Queenstown on the busy corner of Brewery Lane and the N6.
The sale of a further 20 000sqm of retail, industrial and office space was concluded at the auction. These included four lots comprising a total of over 2300sqm of office space situated in Wynberg in Cape Town’s popular Southern Suburbs, Napier in the Southern Cape, Polokwane in Limpopo and Edenberg in the Free State, which were sold by an institutional seller. Acquired by several private investors, these properties achieved a combined price of R9 million.
Some of the other properties sold on the auction included a property consisting of multi-tenanted industrial units in Boksburg – which fetched a selling price of R22.1 million, an industrial mini-park in Heriotdale in Johannesburg which sold for R16 million, and multi-tenanted units in Wynberg in Johannesburg which fetched a total price of R9.24 million.
A block of ground-floor retail and residential apartments above in Norwood in Johannesburg achieved R10.4 million. In Lichtenberg in the North West Province an office building was sold on the auction for R7.8 million, a 4610sqm industrial warehouse in Powerville in Vereeniging was acquired for R6.5 million, while a small retail centre with upstairs office component in Bronkhorstspruit just east of Pretoria and en route to Witbank (eMalahleni) was purchased for R6.1 million.
Adds Raad: “Not surprisingly, particularly in the current economic climate, we have found there is minimal demand for vacant buildings. The focus is on sustainable investments - where tenants can easily be replaced should they default or depart. As a result of lower risk, well-positioned properties will always be in demand.
“We have noticed that private investment market yields have moved above 10 percent. Historically, many properties achieved single digit yields, however, with an increased supply of stock in the market, buyers have an opportunity to be more selective on their investments. Sellers who envisage no upside on their respective properties are helping create movement in the market, thereby affording buyers the opportunity to unlock potential.”
He says other trends are seeing listed property funds divest of non-core stock and stock which has been exhausted to its full potential. “Whereas they may no longer wish to expend further time nor invest further in these properties, the smaller property investor has the energy and vision to turn a fund’s rough diamond into a gem.”
The positive demand for commercial property is borne out by a recent Lightstone report, which reveals that transaction activity in the South African commercial market has increased in recent years. The report also highlights the acquisition of properties in non-CBD areas. Adds Bradley Stephens, MD of Broll Auctions and Sales: “We have also seen investors divest of their smaller commercial property portfolios and invest in the REITs (Real Estate Investment Trusts) as these offer more liquidity and flexibility with their investments.
“Simultaneously this has created new opportunities for new players to enter the market. The time has never been more opportune for investing in the South African property market, as international investors still find huge value in solid bricks and mortar in comparison to other countries. The only barrier to entry in the current market is finance and the loan to value conundrum.”
Broll Auctions and Sales next multiple auction of commercial properties takes place on 18 August 2015.