THE retail market is the best performing property sector, but this status does not apply across the board, Mariette Warner, head of fund management and securitisation at Standard Bank Properties, says in her listed property report for the third quarter.
Warner, who runs the Standard Bank Property Income Fund, says the reason this is not a given across the board is the diverse nature of retail property.
"It varies from dominant regional centres to convenience centres subject to varying degrees of competition, and earnings growth can be below expectations," says Warner.
"This is one sector where an investor can be extremely disappointed if the stance of retail is good, so buy the retail portfolios' is adopted.
"The economics of a retail portfolio must be very carefully researched. Sustainable rentals are driven by the revenue generated by the tenant base."
Warner says one aspect of retail property that creates higher than average risk is that regional centres are very large investments, and if they do not perform they are difficult to sell. Consequently earnings continue to be eroded while a sale is in progress.
"All said, carefully selected retail under very astute management is the only way to produce consistently good returns." This means that capital expenditure on an existing centre where there is real demand will produce high incremental returns and enhance net asset value beyond growth in market rentals.
Warner says retail can be a good investment if retail centres are well located, with a strong shopper base and a growing population in the catchment area.
Warner says there are also signs that the industrial property market is beginning to turn around.
She says it will turn before the office market does because the cost of putting a new tenant in an office is higher than installing a tenant in the industrial market.
"In the office sector it can cost as much as a year's rental," says Warner. However, there are indications of an improvement in office activity in the better located areas in major centres across the country.
Aug 13 2003 07:54:26:000AM Nick Wilson Business Day 1st Edition
Publisher: Business Day
Source: Business Day
Retail sectoris best performer'
Posted On Wednesday, 13 August 2003 02:00 Published by eProperty News
THE retail market is the best performing property sector, but this status does not apply across the board, Mariette Warner, head of fund management and securitisation at Standard Bank Properties, says in her listed property report for the third quarter.
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