Business Partners, a risk finance company for formal small and medium-sized enterprises, said on Wednesday it had allocated R500m of its annual investment budget to commercial property. This would de-risk its investment portfolio.

According to Business Partners executive director Gerrie van Biljon, investing in commercial property as a long-term strategy offered attractive risk-adjusted returns in comparison with other investments. "Money and capital markets returns offer low yields in comparison with properties.

"Commercial and industrial property remains an attractive investment for entrepreneurs, either as a sound long-term investment or to secure tenure for their own business operations."

Marius Muller, CEO of retail investment property company Pareto, said at a Business Partners seminar on Wednesday that government spending provided an opportunity for the property sector. This expenditure would "assist the property sector in terms of filling vacancies, stimulating new development and activity".

"We are starting to see, on the industrial side, there's significant movement already."

Mr Muller said prime logistics space in metropolitan centres would likely remain in strong demand and locations close to markets would become increasingly attractive with rising transport costs. There was increased demand for industrial property, while more support services would potentially grow the need for office space.

Infrastructure and services investments in rural areas would also "unlock" smaller markets.

Mr Muller said a concern in the listed property sector was that this segment was seeing a significantly higher number of transactions, but their value had declined significantly as small properties were being sold. "This is a concern to me in terms of the kind of listings that we're seeing and (their) quality ."

While the smaller, newly listed funds were looking to bulk up and gain critical mass, transactions in the market were often limited to smaller, lower-quality portfolios as large properties were not being traded.

"We expect some sort of consolidation that will happen between those funds to get them up to a chunky size where they can be attractive to fund managers and investors," Mr Muller said.