The commercial property market has possibly been one of the industries most affected, the recession, high unemployment, liquidations, insolvencies and the global economy have all had a direct impact on the market. 

Past years have seen the South African commercial property market out performing global competitors.  This is no longer the case.  The mid-year IDP figures indicate a drastic decrease in capital values with total income returns in the sector below 5%.  This decline can be attributed to negative capital growth, the past over evaluation of properties, rising capitalization rates, increasing vacancies and a slow-down in the growth of the rental market. 

Marna van der Walt, CEO of JHI says, “This decline is expected to continue throughout 2010 with an upswing in the market anticipated nearer the end of the year.  However, it is not all doom and gloom.  We believe that 2010 will see South Africa experiencing a positive economic growth, inflation reducing to within the target range, a change in banks lending criteria, improved business confidence and an upturn of the global economy.”

There are still some worrying elements that need to be addressed for South Africa to once again be on stable ground.  The high unemployment rate which has increased by 6% this past year will continue to impact negatively on household spending, and the fears of this figure increasing once the government infrastructure upgrade is completed will continue to affect consumer positivity.  The closing of manufacturing outlets as a result of poor retail performance is also considered to continue into next year. 

Further pressure will be placed on retail outlets with the proposed 35% electricity tariff increase.  Business owners will need to recover these costs somewhere and this could result in further retrenchments and scaling down of business operations.  This could lead to a domino effect  – vacancies of properties, slow down of retail growth and further pressure on our unemployment rate. 

“2010 will not be plain sailing by any means and we have a far way to go, if ever, to acquire the highs we experienced over the past years. But, we can anticipate an upturn with new developments, investments and the upcoming 2010 World Cup, all working towards a better economic environment,” concludes an optimistic van der Walt.