Following a number of years of flat market conditions in the Western Cape, we are starting to see changes in the levels of interest in certain sectors of the industrial and commercial property market, says Dave Russell, director of Baker Street Properties.

"Increased activity in the industrial market began in the second half of 2002 with a number of large users entering the market requiring leases on predominantly warehouse space.

"This activity was experienced in conjunction with a growth in demand from owner/occupiers looking for properties to own," said Russell.

"The result has been a sharp reduction in industrial stock and the potential of a shortage looming in the not-too-distant future.

"Historical data confirms that a recovery in the office sector is always preceded by a recovery in the industrial sector and should this repeat itself then it is only a matter of time before the commercial sector turns and once vacancies start to reduce then rental levels will increase.

"Office tenants should take note and, depending on the status of their current lease, take a position to negotiate favourable lease terms while the current tenant market exists.  

"While office vacancies remain at high levels landlords will continue to offer competitive terms to solid tenants.

"Strong investor demand is also being experienced in the sale of industrial, commercial and retail properties with this sector of the market being driven by private investors and listed funds.

"As a result of this demand, together with the reduction in prime lending rates, we are seeing yields move lower, which in turn increases property values," said Russell.

"Two years ago it was not uncommon to see average yields in the region of 14% to 16%. This has now reduced to between 13% and 14% with prime properties attracting yields as low as 12%.

"This is good news for owners of industrial, commercial and retail property in the Western Cape who have endured a difficult time and in most cases seen a reduction in their property values since 2000." - Cape Argus