Property remains a safe haven for investors, as long as the interest rates remain steady and at acceptable levels, says Auction Alliance’s Norman Raad.

“We have certainly not seen property prices dip as expected, but having said that, commercial property prices have not gone up in the last 18 months. Pressure remains high on the upper-end of the industrial sector, as rental levels continue to reach levels far greater compared to similar properties in close proximity,” says Raad reflecting on the Johannesburg market.

He notes that as corporates restructure and start adhering to strict budgeting codes, better investment decisions will be taken going forward: “Not long ago prime industrial areas were fully let and empty properties were impossible to find.  However, even though properties in good areas remain exceptionally expensive, current trends indicate that the market is slowly opening up for the tenant.”

“There are opportunities out there and my suggestion is to follow the areas where rentals are low and there is room for growth,” advises Raad. He believes that sound investment opportunities lie in B- and C-grade properties: “There is growth in these market segments, and these kinds of properties are set to become very sought after as investors inevitably look for better deals and ways of saving money. As the commercial office market, which comprise A-grade offices and areas, become too expensive, the likes of surrounding offices nodes will offer great opportunities for the tenant and thus demand for those properties will increase.” He notes that good growth areas, such as Sunninghill and Rivonia, offer good investment potential: “Here, large vacancies will force property owners to offer attractive rentals in order to fill unoccupied space.”

Raad is of the opinion that, at the moment, older offices that can afford a facelift are a much better investment than new builds: “The demand is just not there to make new developments financially feasible.” Raad says that surrounding commercial nodes can expect an increase in demand due to the high rentals expected in the neighbouring high-end areas: “The more exclusive areas, such as Sandton, Melrose and Rosebank for example, will start to feel the rising negative pressure. We have seen rentals decline by 30% to 40% in these areas, but selling prices have not come in line with the current status quo of the declining rental market – try and buy a property in any of these areas, and you will be asked to offer top dollar for the deal to be accepted.”

With regards to retail property, Raad hopes that this market is close to seeing the bottom of the cycle, especially since the small- to medium-sized centres were heavily affected in the economic slide of 2008 and 2009: “Investors should look at the opportunities where there are strong anchor tenants in the centres, which are attracting lots of feet. You shouldn’t rely on the line shops to carry you through the difficult times, as the economic climate remains tough and the small businesses will struggle far more than national tenants that enjoy favourable rentals and a large following.”
 
Raad says that Gauteng is the epicenter of smart and plentiful investors and that he has seen the clever buyers coming out and aggressively buying again: “Maybe not at the low yields of 7%, but they are buying. I believe that we can look forward to a better commercial property trading market, as relatively speaking, there are not enough good properties out there to satisfy the increased amount of buyers. This will keep our commercial property market relatively healthy in terms of secure investments.”