By Nick Wilson
 
Office rentals are expected to increase up to 20% over the next year, according to JHI Real Estate's South African property report for this year.

Speaking after the launch of the report, JHI chairman Les Weil says the office market has remained relatively flat over the past five years because so much space is available.

But Weil says the "vacuum has been taken up" and, with building costs going up, rentals are expected to follow suit. Already, new office developments are fetching rentals of R100/m² and more.

Weil says JHI is "very positive" about the commercial property sector's prospects over the next few years up to the 2010 Soccer World Cup. But retail property rentals, which have been increasing dramatically over the past few years, will not experience such strong growth in the coming year.

"Although retail rentals have increased very substantially in the last 12 months, in some cases by more than 30%, which includes turnover rentals, retail rentals may see slower growth over the next couple of years."

The industrial property market is also expected to continue performing well if the South African economy continues maintaining reasonable growth of 4%-5% over the next few years.

But Weil says the "so-called easy money" may have already been made in the property sector, particularly in the residential and retail markets.

"If you are an investor looking to invest to make a big profit in the next couple of months, that is not the nature of property investment. Whether you are an investor or a tenant, typically your investment is of at least a medium-term nature."

He says a number of factors are positioning the property market to benefit significantly over the next couple of years.

These include government spending R370bn on infrastructure and the commitment of the banking sector to spend R45bn on affordable housing by 2008.

He says the effects of the 2010 developments will also boost the property sector.

"We are looking at very good positive growth and positive rewards in property. We are also very positive for the prospects beyond 2010 - we are going to have 400000 visitors and around 2-billion people watching the World Cup."

Weil says this offers a "massive opportunity" for tourism and foreign direct investment.

Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge