Nick Wilson

Property Correspondent

CONFIDENCE among listed property companies and managing agents in the South African office property market has increased significantly, with players more positive on the outlook for offices than retail and industrial properties in the next six months.

According to commercial property portal eProp’s commercial property index, the expected conditions for the end of this year continue to be positive for commercial property as a whole.

eProp research director Marc Schneider said yesterday the outlook for industrial property for the next six months was slightly up to 79 points from 77 earlier in the year, while the reading for offices improved from 73 to 82.

Schneider said on the group’s index 50 is equal to a neutral outlook.

The retail index has come down from 73 to 68 .

Schneider launched his first confidence report on the commercial property market in March this year and releases a report every six months.

"eProp spoke to several listed property players and managing agents about their anticipated outlook for the commercial property sector. So far it looks like the confidence in retail property will drop slightly by the end of the year. What you can read into that is confidence of landlords in being able to grow their retail bases is not as strong as other sectors like offices and industrial."

Offices would possibly be the flavour of the month with investors in the next six months. He said this was likely unless developers oversupply the market with new offices in anticipation of a more favourable market.

Mariette Warner, fund manager of Stanlib’s Property Income Fund, said she was not surprised that confidence in offices was the highest, because vacancies in office buildings had fallen to "very low levels" in some areas.

"The volume of leasing enquiries is strong and in the majority of (property) portfolios the negative reversions on lease renewals are significantly less than in the past," said Warner.

She said when companies renegotiated leases with tenants, they had to reduce their rents every year in the oversupplied market over the past four years.

"Now this is changing. It is becoming more of a landlord’s market," said Warner.

She said the drop in retail may be due to the high levels of retail construction taking place in the market and perceptions that the rate of increase in consumer spend is not sustainable.