By Reginald Tachie-Menson

South Africa's largest listed property company Growthpoint believes the country as a whole has turned a corner and is of the opinion that the effects of the recession will be lessened during the next 12 to 24 months, which will open up growth opportunities. However, the company's CEO, Norbert Sasse is cautious about vacancy rates in current conditions and of oversupply.

While vacancies are still on the increase, Sasse foresees debt in arrears deteriorating slowly.

"We believe that SA is emerging from the recession. This emergence is fairly slow. There is still concern around the state of the economy," says Sasse.

Slowly but surely Growthpoint expects an improvement in occupancy.

Sasses says a positive sign is that there has been a change in the approach of all the major banking institutions, where most of them, prior to the current environment, were focused on consolidation and sorting out balance sheets. Banks have moved away from this approach and are keener to lend and make loans available.

This is good for Growthpoint as a borrower. Margins that banks are looking to charge are starting to lower as a result of the desire to lend.

A 6.4% vacancy rate across all three key sectors has been observed - retail, industrial and office - and this figure is steadily improving although Sasse cautions that vacancies will not immediately get better. Again the changes are expected to be gradual.

In terms of the three main property sectors, retail has been the most stable with 2.7% vacancy figure. A slight improvement in this sector is expected and as a result, things look positive.

Growthpoint harbours some concern over developments that are pending, however. There is concern about oversupply, since multiple retail projects are being proposed. If all were to go through problems of oversupply would become very real.

Retailers at this stage are keen to commit and this is a little surprising as it was thought that there would be a longer consolidating period.

The office sector has a vacancy rate of 9%. The general observation is that this rate has peaked. There is now an aim to start reducing vacancy. This reduction would be gradual since there is demand for office users but the demand is lackluster.

There are very few major corporates that are on expansion paths. The activity is generally movement from one place to another. We see the trend continuing for another 12-24 months, mainly driven by the low economic growth rates.

There is particular concern about Sandton and the Western Cape. This is because of numerous proposed developments that are ready to go, but demand is lacking. Growthpoint is very speculative around this. Again there is concern of oversupply.

Sasse says the industrial sector is experiencing the most activity. The vacancy rate is 6.4%. Growthpoint is not foreseeing massive take-up of space, but are confident in the stability.

Industrial tenants were hesitant to make firm decisions before on movement and expansion, but this has changed. He cautions that this is not always positive, however, as tenants are now more mobile and are thus more likely to move from one portfolio to another at times.

Rent levels are most under pressure in the office sector. Vacancy factors are a more major issue in the sector. If vacancy levels drop below 5% on a national level here, it will become more attractive.

Despite the concern, the vacancy levels are not indicative of a crisis.

Growthpoint is an FTSE/JSE Top 40 company with a market capitilisation in excess of 25 billion rand and assets in excess of R34 billion.

Established in 1987, Growthpoint Properties is the largest listed property company by assets in South Africa, with a portfolio of more than 430 retail, office and industrial properties across South Africa, Namibia and Australia.

Source: I-Net Bridge