Commercial property investment activity is pleasing

Coming off the heady heights around 2008, commercial development activity now appears to be emerging from it's trough encountered around 2010/11 and where all segments of the sector had bottomed, as reflected in the graphs below. At constant prices, commercial investment activity is up by 8.2% (as compared to -1.4% for residential); it is virtually flat for the value of commercial plans passed.

Midway through 2012 (Jan-June YTD as measured in physical space, m2) we see that the trend in planning activity has picked up; so too for completions and particularly regarding industrial investments: Retail planning activity is up just over 8%, with industrial up 26%; in terms of completions retail is down nearly 10% and industrial is up a hefty 53%; both office planning and completions are down.

At a Provincial level, the Western Cape is showing robust confidence with planing activity strongly positive for all segments, so too Limpopo albeit of a lower base; Industrial planning is very strong in KZN at over 57% or 223,000m2; by comparison Gauteng industrial planning is down. On the completions front, Western Cape Industrial is strong at over 115%, or over 163,000m2; Eastern Cape and North West office completion activity is strong as is Free State retail; Gauteng is showing positive growth for all segment completions - particularly strong for industrial at 62% or over 264,000m2.

The reasonable investment returns offered by real estate coupled with appetite for the asset class (both direct and listed), is no doubt driving the relatively good growth in commercial investment activity, but in order for returns to be sustainable, it remains incumbent on market fundamentals to help prop up demand.

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