Investors go for business space

DEMAND by investors for sectional-title office and industrial properties has increased significantly over the past 18 months, and more of these types of products are expected to hit the market next year.

David Green, MD of office and industrial property brokers Pace Property Group, says that when the trend took off there was limited commercial or industrial property stock available.

“But in 2006 we are going to see a variety of products coming to market that will appeal to all investors, whether they are looking for quality or affordable space,” says Green.

He says lower interest rates and “rapidly diminishing” vacancies in the office and industrial property sectors are making sectional title accommodation “an attractive alternative” for small to medium and even larger investors.

Green says that space is filling up fast, rents are rising and that, as small tenants wake up to the long-term interest rate regime, they are beginning to buy into sectional title offices.

Prices range from R5000/m² in Randburg to R15000/m² for offices in Sandton, Illovo and further north in Johannesburg.

The asking price for industrial mini units throughout the country is R3500/m² to R5000/m².

Green says that before sectional title office and industrial property came into existence there were no alternatives other than free-standing buildings where the owner had to assume responsibility for cleaning, maintenance and other costs.

“By going into a sectional title development, they (owner-occupiers) are able to reduce costs because they are sharing them among a pool of buyers and are able to improve the quality of property services employed.

Property economist Erwin Rode of Rode & Associates says the small investor, including the owner-occupier, is realising property is one of the most attractive investment classes at the moment.

“For owner-occupiers and small-time investors, non-residential sectional title property is a very popular asset class right now because the properties are available in smaller chunks,” says Rode.

He says the demand for sectional title nonresidential property will continue into next year.