Positive spinoffs regarding oversupply

Posted On Wednesday, 23 May 2001 02:00 Published by
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Need to find flexible mechanisms pays for investors, developers and tenants

Need to find flexible mechanisms pays for investors, developers and tenants

THE perception that there is oversupply in the local commercial property sector has had positive spin-offs, says the latest Nedbank Property Finance quarterly report.

'A tightening market is normally used to justify a negative outlook but there are clear positive spin-offs that are starting to emerge as a direct result of the prevailing conditions in the market,' says the report.

A strengthening focus on the tenant is one of them, it says.

'Investors are increasingly trying to find mechanisms that meet the needs of investors, developers and tenants more effectively.'

It says in the past, few landlords were willing to meet users' requirements for flexibility in their real estate. 'However, investors have started to price this requisite, flexibility, into leases.'

'The more flexibility a user requires, the greater the price.'

Developers are also paying more attention to market demand in terms of type of space and service required. 'There may in fact be a fundamental shift from providing property to providing functional space.'

The report also raises the question of whether the commercial and industrial property sector should continue supplying the market with new space or whether to allow demand to catch up with recently completed supply. The dominant view in the market has been that the commercial property sector is oversupplied.

The result of oversupply was evident in the latest SA Property Index figures: total returns in the retail property market slipped about seven percentage points to 10,5% last year from 17,6% in 1999. This saw the retail sector total returns slipping into the second place after six consecutive years as the best performer in the market.

The retail sector was overtaken by the office sector, which showed an increase in total return from 9,7% to 12,8%.

The report recommends that the performance of existing and new property investments be reassessed as there could be a shift in the balance between supply and demand.

style='font-size:9.0pt;mso-bidi-font-size:10.0pt; font-family:Helvetica;mso-bidi-font-family:'Times New Roman';color:maroon'>May 23 2001 12:00:00:000AM Sibonelo Radebe Business Day 1st Edition

style='font-size:9.0pt;mso-bidi-font-size: 10.0pt;font-family:Arial;Wednesday
23 May 2001

Publisher: Business Day
Source: Business Day

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