Loyiso Sibali

Property Reporter

GROWTHPOINT Properties, SA’s largest listed property company, reported strong leasing numbers for the financial year to June, defying weak economic conditions.

Growthpoint, whose market cap grew 26,8% to just over R18bn in the past 15 months, concluded leasing deals valued at R2,44bn for more than 800000m² of space in its property portfolio for the past financial year.

“This reflects a highly active market, riding the crest of the wave, which generated good increases in rental levels,” said Steve Grupel, head of retail leasing for Growthpoint in Gauteng.

The retail sector was the top performer, bringing in leasing deals valued at more than R995m over 166000m²

The Gauteng market clocked up some R735m worth of deal values for leases signed over 129000m² of space in the sector.

The second top performer was offices, which closed leasing deals to the value of R926m over 181000m², and third was industrial property, concluding R516m worth of deals over 455000m²

But Grupel said present economic conditions had led to a slowdown in the market, most notably in the retail sector, which meant these “super” figures would be a challenge to sustain.

“In terms of retail, national tenants are ‘right-sizing’ and in some cases consolidating or reducing space to trade more effectively,” Grupel said. “This said, there is still growth with select retailers pursuing expansion plans; however, this is not as aggressive as in recent years. Retail is certainly not going backwards,” Grupel said.

Andre Stadler, MD of Catalyst Fund managers, said the general property market was holding up well on the basis of fundamental supply and demand factors. But he said he had seen a weakness coming through in the form of tenancy failure in the retail sector.

Stadler said the large retail properties had been able to weather the economic storm but those hit hardest were the smaller “neighbourhood” shopping complexes.

The Reserve Bank increased the benchmark interest rate by 5% since June 2006 as inflation soared to its current 13%.

The local retail sector had come under pressure as consumer spending declined on rising inflation and interest rates.

Paul Kollenberg, office portfolio manager at Growthpoint, said there were fewer vacancies and they continued to decrease in the office sector. “It is encouraging that we have a number of tenants who are growing and making us a part of their growth by increasing the size of their premises. “This is in addition to new lets,” said Kollenberg.

He said that there seemed to be a general trend of consolidation and growth through mergers in the market.

Engelbert Binedell, industrial portfolio manager at Growthpoint, said there was still a huge demand for industrial space, specifically for older “B” and “C” grade properties.

He said their value propositions were their “affordable” rentals compared to newer “A” grade rentals, which had grown exponentially over the past few years.

Source: Business Day