OVERALL office vacancy has now breached the 10% level — the highest since 2004 — with office nodes previously deemed popular experiencing a decrease in demand, owing to a weak economy.

A director of the High St Property Company, Rodney Luntz, said on Friday additional costs such as electricity were putting pressure on the rental property sector.

“A dramatic electrical tariff increase of more than 25% this year alone is seeing operational costs skyrocketing, with these cost pressures being passed on to tenants,” Mr Luntz said.

The year started off well for listed property and seemingly also for the underlying commercial property portfolios. The South African listed property sector recorded the highest total return of 1,60% of the four traditional asset classes for July.

Bonds with 1,42% and cash at 0,44% were the next best performing asset classes for the month. Equities recorded a total negative return of 1,99% in July.

South African listed property, as an asset class, has recorded the highest total return for the past 12 months with 14,73%. Mr Luntz said initially he had high hopes for the commercial property sector in the first quarter.

“Sentiment was good and the economy was on a growth path coming out of a recession. Rentals were rising and vacancies across the board were stabilising and in some areas decreasing. The SA listed property sector, in fact, touched a record high of 395,38 points in July,” he said.

But Mr Luntz said the outlook had recently been dealt a blow with both the commercial office and the industrial property sectors coming under pressure.

According to the SA Property Owners Association’s latest report for the second quarter of this year, SA’s overall office vacancy rate has breached the 10% level.

The report’s figures show that popular office nodes have now experienced a decrease in demand. These include Bedfordview, Braamfontein, Bruma, Cresta, Blackheath, Fourways, Greenstone, Hyde Park, Dunkeld, Randburg and Rivonia.

The Sandton central business district is sitting with vacancies of 9,6%. But that is still better than nine months ago when it recorded vacancies of 11,4%.

But while South African commercial property prospects may not be that good at the moment, opportunities in other African markets are attracting property investors.

Prof Francois Viruly, presidentelect of the African Real Estate Society, said South African property developers and investors were following their local tenants across the African continent.

“South African investors are already showing solid investment and development activity across southern Africa, Ghana, Nigeria and Angola,” he said.

Prof Viruly said at present much of the focus was on the development of shopping centres and hotels.

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Source: Business Day