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Property Investment-Logic Questioned!

Posted On Sunday, 08 December 2002 02:00 Published by
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Rethink: aesthetics don't govern rental returns in central areas, says Peter Rowell Commercial Properties director Peter Rowell has been involved in some of the city's biggest property deals involving millions of rands.
Rethink: aesthetics don't govern rental returns in central areas, says Peter Rowell Commercial Properties director Peter Rowell has been involved in some of the city's biggest property deals involving millions of rands among the country's largest and smallest corporate investors and asset managers, yet, he says, he will forever remain baffled by the motives driving property investment decisions. 'Most confusing is how these decision makers are influenced by the aesthetics of an area which they allow to deter them from making sound investment property purchases. It is not unusual for an investor to think nothing of paying R5 million in this currently overheated residential market for a Clifton apartment, yet suggest that he invest a similar amount in a modern warehouse leased to a listed tenant, yielding over 20% on a triple net lease in Woodstock and suddenly there are no investors,' says Rowell. A classic example, he said, was a 5 000m2 state-of-the-art distribution warehouse leased to a public company paying just over R1m a year in rentals which has been on the market for more than 12 months and which had been unable to attract a single serious offer on the asking price of R5.2m. 'I know we are not talking about Clifton apartments but to get property in perspective, we do have a well- designed and constructed building in a commercially viable and active area that has excellent access to the CBD, the harbour, the railway, and major trunk roads. 'When it comes to risk assessment, I know where I would like my money to be, and it won't be in a Clifton apartment.' Rowell admits that the only reason buyers are not knocking down his door to put in offers is that the Albert Road area of Woodstock is not Somerset Road or Marine Drive. It is nevertheless a very high traffic area and well-situated. But then you wouldn't get even 14% on your money with a listed tenant in Marine Drive. The point is that those property people who could be upgrading their portfolio's performance with this building, fail to see the potential in the property and the area. This is not the first time Rowell has come across resistance by property investors to purchasing buildings in what are perceived to be down-market addresses but located in vibrant areas. 'We had a commercial property opposite the Rosebank taxi rank delivering 20% without ever having had a vacancy, listed for about a year before it found a buyer,' Rowell said. 'Investors must understand that when brokers talk about location, location, location being the three most important factors governing the purchase of a property, the parameters of location for a residential property are very different to those governing a commercial or industrial investment.'
Publisher: Weekend Argus
Source: Weekend Argus
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